HMRC is sending cheques worth around £1,000 to married couples and civil partners who make backdated Marriage Tax Allowance claims. The payment covers up to four previous tax years, and can be paid on top of an allowance increase for the current year.
The tax-free Personal Allowance has been locked at £12,570 since 2021, with earnings above that normally taxed at 20%, then 40% and 45% for higher incomes. The freeze, combined with inflation, has pushed more people into higher tax bands, a trend known as 'fiscal drag'. New Prime Minister Andy Burnham has promised to "look at" the freeze in the next Budget by Chancellor John Healey, but has not committed to an increase.
How the Marriage Tax Allowance works
The perk is available to married couples and civil partners where one person earns below the £12,570 Personal Allowance and the other is a basic rate taxpayer. The lower earner can transfer 10% of their unused allowance to the other partner, increasing the higher earner's tax-free amount and reducing the overall household tax bill.
Martin Lewis explained the process on The Martin Lewis Money Show Live on ITVX in March: "So here's how it works, it has to be a non-taxpayer, so that's someone earning under the £12,570 a year Personal Allowance, the amount that you can earn each year tax-free, married to a basic rate 20% taxpayer."
He added: "The non-taxpayer can go to gov.uk and apply to give 10% of their Personal Allowance to the taxpayer."
What you gain
Lewis said the non-taxpayer's personal allowance drops to £11,310, while the taxpayer receives an extra £1,260 of allowance. He said: "The gain of that, this year, is £252 because [the spouse] has got £1,260 they're not paying 20% tax on that they would have otherwise."
Because the Marriage Tax Allowance can be backclaimed for four prior tax years, the total benefit can reach around £1,000. Lewis explained: "The times five, is crucial. Because with the Marriage Tax Allowance you can back claim four tax years, so you can get this tax year, which is done by altering your tax code, and you can go back four prior tax years, which is about £1,000 benefit, which you get as a cheque, or through BACS, assuming of course that you were eligible for it."
Payment methods
For those eligible only in the current year, the allowance increase is applied through a tax code change rather than a payment. For those claiming only previous years, a cheque or BACS transfer is sent. Those who qualify for both the current year and earlier years receive both the tax code adjustment and the backdated payment.
