Married couples allowance is a tax break available for married couples or people in civil partnerships. But what does married couple’s allowance actually mean and how much could you see your tax bill decrease by each year?
What is Married Couple’s Allowance?
Married Couple’s Allowance is a tax exemption available to married couples and civil partners.
This tax break enables you to transfer £1,250 of your personal allowance to your spouse or civil partner.
This amount is 10 percent of the £12,500 personal allowance figure for 2020/2021.
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Who is eligible for Married Couple’s Allowance?
You can claim Married Couple’s Allowance if you meet each of the following conditions:
- You are married or in a civil partnership
- You are living with your spouse or civil partner
- You were born after April 6, 1935.
How much could you save?
Couples eligible for Married Couple’s Allowance will see you transfer 10 percent of their Personal Allowance to their partner.
This means the partner who earns more will get £1,250 added to their Personal Allowance (the amount you can earn before having to pay tax on your income).
In total 20 percent of this allowance is given as a reduction on your tax bill, unlike the Personal Allowance which is deducted from your taxable income before tax is calculated.
Essentially, it enables a non-taxpayer to transfer their allowance to a taxpayer.
For example, if partner A earns £30,000 a year, they are a basic rate taxpayer.
If partner B earns £8,000 a year, they are a non-rate taxpayer.
By claiming the Married Couple’s Allowance, the household could be £250 better off once the non-taxpayer transfers £1,250 to partner A.
This is because the non-taxpayer would pay tax on income over £11,250 rather than £12,500.
For the 2020/2021 tax year, you could see your tax bill drop by between £351 to £907.50 a year.
You can use this Married Couple’s Allowance calculator to work out what you could get.
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If you marry or register a civil partnership, you will get the allowance on a pro-rata basis for the rest of the tax year.
If one partner dies or you get divorced or separate, the allowance will continue until the end of the tax year.
Also, it is permissible to transfer your Married Couple’s Allowance to your spouse or civil partner.
If you or your partner are separated through circumstance rather than through a decision to formally separate, you can still claim Married Couple’s Allowance.
Can you claim for backdated Marriage Allowance?
In addition to this year’s tax allowance, you can also backdate your claim by up to four tax years.
The amounts for each year are as follows:
- 2016/2017: £220
- 2017/2018: £230
- 2018/2019: £238
- 2019/2020: £250
- 2020/2021: £250.
This means if you claim now and backdate for the maximum of four years you will receive up to £1,188.
How to apply for Married Couple’s Allowance
To claim Married Couple’s Allowance you need to submit an application to HMRC.
To submit an application you will need your National Insurance numbers, accepted forms of ID for the non-taxpayer and details of your marriage or civil partnership ceremony.
You can also claim the allowance by filling in a Self Assessment tax return each year.
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