The Marriage Allowance Explained

Did you know you may be able to transfer part of your personal allowance to your spouse/civil partner for added tax advantages? This is known as the Marriage Allowance, which over 2.1 million couples already utilise, however, many more eligible couples are not aware that they can apply for this, just like my clients Christine and Jason were.

Christine, 65, is retired and is married to Jason, 60, who earns £20,000 per annum before tax.

Everyone has a personal allowance (£12,570 for the 2022/23 tax year in this case) which is the amount you can earn tax-free each tax year. However, as Christine does not utilise her full personal allowance she pays no tax, whereas Jason exceeds his by £7,430 on his current salary and is therefore taxed on this at 20% (£1,486). However, by utilising the Marriage Allowance, Christine can transfer part of her personal allowance to Jason for additional tax savings.

The Marriage Allowance permits up to £1,260 (around 10% of the personal allowance) to be transferred from one non-tax paying individual to their higher earning spouse/civil partners. In order to implement this, Christine had to register and apply on the Government Gateway website, which is a relatively simple process. Christine’s allowance then reduced to £11,313 and Jason’s increased to £13,827, meaning he will now only be taxed on £6,170 of his income (tax at 20% = £1,234) making a saving of £252 (for the 2022/23 tax year).

Although this is a relatively small annual saving, it does add up over time and can also be backdated, where applicable, back to 5th April 2018 as per their allowance for those tax years. This meant that Christine and Jason could claim £1,242 by applying for the Marriage Allowance this tax year:

2022/23 – £252
2021/22 – £252
2020/21 – £250
2019/20 – £250
2018/19 – £238

Once the Marriage Allowance is applied, it will continue to automatically transfer until they inform HMRC otherwise due to a change in circumstances, for example, if they were to divorce, change tax thresholds, or either of them were to pass away.

To discuss your tax allowances and exemptions, or for any further financial planning advice, please do not hesitate to get in touch with our Independent Financial Advisers on 0117 450 1300.