Couples miss out on marriage tax break

Question.

I have read that I can get a £432 tax break from HMRC for being married. I understand it also applies to a civil partnership. What is this relief and how do I know if I qualify for it?

Answer:

The government introduced the Marriage Allowance tax-break in April 2015 for married or civil partnership couples. You and your partner can share your tax-free Personal Allowance to help them lower their overall tax bill. This tax year, 2016/17, you can transfer £1,100 of your Personal Allowance to your husband, wife or civil partner, which will save £220. However, you may be entitled to an even bigger tax break of £432 this year if you were eligible but didn’t take advantage of the Marriage Allowance in 2015/16.

In recent weeks and with 2015/16 tax returns due by 31 January 2017, HMRC has launched a campaign to get more people to apply for its transferrable marriage allowance, after it emerged more than 2.9m couples across the UK are missing out on the free tax break. Just 1.3m of the 4.2m people HMRC calculates as eligible have taken advantage of the tax break.

As we’ve already mentioned you’ll need to be married or in a civil partnership to apply for the Marriage Allowance. Unfortunately, living together even if you have children doesn’t make you eligible for the scheme. Both partners need to be born on or after 6 April 1935 (if one or both of you was born before this date you can claim the Married Couple’s Allowance). One partner needs to be a non-taxpayer, which means they earn under the Personal Allowance threshold. For 2015/16 that means earning less than £10,600 and for 2016/17 less than £11,000. The other partner has to be a basic rate taxpayer. For the 2015/16 that means earning less than £42,385 and for 2016/17 less than £43,000.

You can apply for the Marriage Allowance on the HMRC website or by phone. You’ll need both of your National Insurance numbers plus ID for the non-taxpayer and it should be the non-taxpayer that makes the application. HMRC will notify you if you are eligible for the 2016/17 allowance and whether you were also eligible for the 2015/16 allowance. Most of the time the Marriage Allowance will be paid adjusting the recipient partner’s tax code. The transferring partner will also get a new adjusted tax code for the year. Whoever receives the allowance, whether it’s you or your partner, will get the money in their pay packet each month. Your or their tax code will be altered to take account of the bigger personal allowance. The Marriage Allowance will continue to be paid until you cancel it or you inform HMRC that your circumstances have changed.

Since its introduction in 2015, the Marriage Allowance has been met with problems and resistance. However, the claim process is relatively straightforward and where the fact pattern fits, a married couple can save £432 by making the claim for this year and last year. Are you missing out?

The advice above is specific to the facts surrounding the questions posed. Neither FPM nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.