Introduction -marriage allowance (UK)
The UK Marriage Allowance transfer is a method of tax allowance transfer between two people. However, how much is marriage allowance transfer and what is marriage allowance transfer worth to two individuals? When we consider this, it allows one of the people to elect to make a transfer of personal allowance to their partner. When one is transferring tax allowance to spouse, the transfer can be between husband and wife or civil partners and is worth £1,250 per annum.
However, this is not available to all; it depends on your and your partner’s income. Furthermore, some owners of their own UK contractor limited company may be able to take advantage of this. However, for many it may not be an option due to their circumstances.
How it works
When we investigate what is marriage tax allowance and how it works for UK contractors and other individuals, please note the UK personal allowance is currently £12,570 per annum. Therefore, you can earn this amount every tax year before you pay tax. You can make a claim for UK marriage tax allowance if one partner is not working however, you can also make a married tax allowance transfer if they have income but are not a high earner.
If you fall into the category whereby it could be worth you claiming for the marriage allowance (UK) you should do a marriage allowance check towards the end of each tax year (5 April).
Tax year -6 April to 5 April
The UK tax year is not the same as the calendar year. It runs from 6 April to 5 April and during the tax year is when you can earn your income before tax is applied.
Therefore, have you ever wondered if you can claim for the married couple tax allowance or, in other words, apply for the UK Marriage Allowance transfer? On the other hand, have you never been aware that this tax allowance transfer mechanism exists, or who can claim this allowance? Key to note, many limited company contractors may miss therefore it is worth checking.
The process of transferring tax allowance to spouse is effectively the transfer of part of your partner’s tax allowance being transferred to you. The claim applies to both marriages and civil partnerships.
Common questions on the UK Marriage Allowance
There are many questions out there regarding the marriage allowance claim, which include:
- What is the marriage allowance (UK)?
- How can you claim for this?
- When can you apply for it?
- How much is the tax allowance transfer worth?
- How does the marriage allowance transfer work?
- What is the process when applying for this?
How much can you save when you transfer tax allowance to spouse
When you claim the married allowance, the transfer is worth up to a £252 tax-free saving on the higher earner’s tax bill per year. Although this is not a significant amount, it may be worth transferring tax allowance to spouse in the case of some couples.
Two separate articles on this website which explain how your personal tax position can be affected in the UK are:
Missing out on the UK Marriage Allowance
It is a common fact that many people miss out on the Marriage Tax Allowance claim. This is simply due to a lack of awareness on the transferable tax allowance option. Your limited company contractor accountant will be able to help check if this could be beneficial for you.
In previous times, the Marriage Allowance (UK) was brought in by the Coalition Government. Today, both married couples and civil partners can claim this. Therefore, if, as a couple, you are eligible, you can make a tax saving. When you do this, you can transfer part of your allowance to your spouse or civil partner.
Transferring tax allowance to spouse
The marriage tax allowance transfer will allow one partner to transfer part of their Personal Allowance (PA) to the other partner. If you are the lower earner, you can transfer 10% of your personal allowance to you partner. Therefore to reiterate, the transfer is 10% of the lower-earner partner’s PA to the higher-earner.
In 2022/23, the PA is £12,570. Therefore, when you are the lower-earning partner, you can transfer £1,260 of your personal allowance to your partner. This will result in additional tax relief. In turn, it gives an income tax saving of £252 for the higher-earning spouse.
The entitlement to claim will depend on the income of both people in the marriage or civil partnership.
When do you qualify for the UK Marriage Allowance transfer?
To be eligible for marriage tax allowance transfer, you must satisfy the following criteria:
- You are married or in a civil partnership.
- You were both born after 5 April 1935. If one or both of the couple were born before this date, you would need to claim for the ‘married couple’s allowance’ instead.
- One partner will have total taxable income below the personal allowance of £12,570. Your total taxable income includes any salaries or self-employment profits. It also includes dividends, other taxable income, job seekers allowance, Universal Credit and state pension. The second partner will be earning more than the personal allowance and will be paying income tax at the basic tax rate. However, they will not be in the higher rates tax bracket, which is income above £50,270 in 2022/23.
If you claim for the allowance, the lower income earner will be able to transfer precisely 10% of the prevailing PA for the tax year in question.
It may be the case that the lower income earner does have some taxable income. This could be in the form of salary or some other income. When this is the case, the amount of personal allowance transfer may be less than the 10% mentioned above.
How to claim marriage allowance (UK)
If you are considering making a claim, when can you apply for marriage allowance or when is the best time to do so? The UK tax year starts on 6 April; if you qualify, the best time to put a claim in for the tax allowance transfer is soon after this date. Please note that the partner making the allowance transfer must apply via their HMRC account. Therefore, when you do this, you can ask HMRC to transfer the 10% of your allowance to your husband, wife or civil partner.
You can apply for the transfer of the Marriage Allowance (UK) online via the HMRC website. When you apply, you will need your and your partner’s National Insurance numbers. You will also need proof of ID when you apply. This ID includes your passport, payslip details, and tax credits. In addition, you can also call HMRC on their Income Tax General Enquiries line on 0300 200 3300.
If HMRC accepts your application, they will issue updated tax codes. These will show the allowance transfer from one partner to the other. HMRC will also update the change to the start of the current tax year.
Furthermore, you can also apply for this via the Self-Assessment service in your HMRC account.
UK Marriage Allowance -backdating your claim
The married allowance in the UK came into effect on 6 April 2015. Many couples are not aware they can claim this. However, as time goes by, more couples realise that they can make a claim for this. Regarding backdating your claim, the good news is that you can do this for up to four years.
Many couples overlook to put a claim in for the UK marriage tax allowance transfer. Many more do not even check if it would be worthwhile to claim for this. Although this is not a significant amount, it is worth claiming if you qualify. Please remember, to be eligible for the Marriage Allowance transfer, one partner must pay tax at the basic rate whilst the other will have income under the personal tax allowance and, therefore, an unused personal allowance. The person making the transfer to their husband, wife or civil partner will need to contact HMRC to arrange the transfer.
If you are still unsure how to go about transferring tax allowance to spouse after reading the above, please take the time to speak to your accountant.
Finally, you may have had several employments previously in your working life. Consequently, you may have pension schemes dotted around from these jobs. Therefore, something that you may be interested in is pension consolidation.
Link to Contractor Advice UK group on