For all of those romantics out there who thought the only reason to get married or enter into a civil partnership was for tax reasons, you are in luck. Registration has now opened for the new Marriage Allowance; a government scheme which will allow some couples to share part of their annual income tax allowance, helping them to save up to £212 a year.
How does the new allowance work?
Couples made up of one non-taxpayer and one basic-rate taxpayer will be able to share some of the non-taxpayer’s unused annual income tax allowance.
In normal circumstances each year, individuals can earn up to a set amount each year without facing an income tax bill. The individual personal allowance for 2014/15 is £10,000, but will rise to £10,600 from April 2015.
Anyone who earns less than that amount (taking into account income from all sources) does not pay any income tax. Under the new scheme, they will be able to transfer up to £1,060 of their unused allowance to their spouse or civil partner as long as he or she is a basic-rate taxpayer. From April 2015, that will mean they qualify if they earn between £10,601 and £42,385 a year.
Can anyone qualify?
Anyone who was born on or after 6 April 1935 and is married (or in a civil partnership) can qualify, as long as they meet the rules on earnings. If one member of the marriage or civil partnership was born before 6 April 1935, they can claim the Married Couple’s Allowance instead.
How much will it save us?
The transfer of unused allowances could save up to £212 a year in the first year.
From April 2015, anything you earn between £10,601 and £42,385 a year will be taxed at 20%. If your spouse or partner earns £7,500 a year, they effectively have £2,500 of their allowance that they are not using. Of this, they can transfer the full £1,060. This increases your tax-free allowance to £11,660, and the 20% saving on that extra bit is equal to £212.
If your partner’s earnings are much closer to £10,600, they can still share the leftover bit of their allowance. Say they earn £10,000; they can give you the remaining £600. In this case you will save £120 a year.
When will we get our tax refund?
The reduction in your tax liability will be reflected every month in your pay packet. The partner who is receiving the allowance will have their tax code altered to reflect their larger personal allowance. If you are employed, you will have less of your earnings taken off you each month before you are paid.
Although you can register now, you don’t need to do so to get the benefit for the full year.
How do I register?
You can register your interest in Marriage Allowance on the HM Revenue & Customs website, HMRC will then get in touch to tell you when you can make a formal claim.
Unfortunately, couples who cohabit rather than are married or in a civil partnership miss out on the allowance, regardless of how much they earn or how long they have been together.