Two million people are missing out on the Marriage Tax Allowance, a tax break that can deliver a £252 annual saving and be backdated for up to four years, potentially totalling more than £1,000.
HMRC has confirmed that anyone married or in a civil partnership and aged under 90 may be eligible for the allowance, which lets wives, husbands and civil partners transfer some of their tax-free personal allowance to a higher-earning partner. Co-habiting couples are not eligible.
Eligibility and income limits
To qualify, applicants must be married or in a civil partnership, and both partners must have been born on or after April 6, 1935. One partner must be a non-taxpayer, meaning they earn less than the personal allowance, currently set at £12,570.
To receive the maximum benefit, one partner needs to earn £11,310 or less. However, there is a risk of losing money depending on how the tax is calculated: couples may not benefit if either partner is a non-taxpayer earning between £11,310 and £12,570.
How the allowance works
The person with unused personal allowance can transfer £1,260 to their partner, producing a typical saving of £252 per year, which is 20% of £1,260. The higher earner then pays less tax on their pay.
Claims for previous years can be made by post, and money is received by cheque or bank transfer. Online applications are available at gov.uk/apply-marriage-allowance, but backdated claims cannot be made online.
Important considerations
Once the allowance is transferred, there is no need to reapply, but it must be cancelled if the relationship ends or circumstances change, such as entering a higher tax bracket. If the higher-earning partner becomes a higher or additional rate taxpayer, the benefit is lost.
Couples may also lose out if the non-taxpayer earns just under £12,570 and the basic rate taxpayer earns just over. The non-taxpayer must transfer 10% of their allowance in full, meaning they will pay tax on earnings above £11,310. As long as the basic rate taxpayer earns more than £13,830 annually, they save 20% tax on the full amount received; otherwise, the non-taxpayer may start paying tax on a larger amount than the taxpayer saves.
