While tax may not be at the forefront of your mind when planning to get married, there are important tax benefits that reduce the tax liability of a married couple.
The UK tax system makes specific allowances and incentives for married couples.
These were first introduced as a means to incentivise marriage, ease the financial burden, and promote financial stability. The two instruments by which tax relief is provided to married couples are marriage allowance and married couples’ allowance.
While small, both of these can provide valuable income support when one partner earns more than the other.
For example, they can be particularly helpful if one partner has childcare or other caring responsibilities and is not in paid employment, or works part-time.
However, it’s important to remember marriage allowance and married couples’ allowance are not dependent on a couple having children. Eligibility is conferred by marital or civil partnership status and the income of each partner.
In this article, we’ll outline what tax benefits you may be able to receive as a married couple or civil partners and how you go about applying for them.
Do you pay less tax if you are married?
To recognise the financial commitments that come with marriage or civil partnership, the tax system includes specific allowances to support married couples in managing their overall tax liabilities.
Understanding how these allowances work and what you may be entitled to is essential for couples making decisions about their tax affairs.
For most couples, the key tax benefit to consider is marriage allowance UK.
Marriage allowance has in effect replaced the married couples’ allowance for anyone born after 1935, introducing a simplified, transferable tax benefit for married couples and civil partners.
What is marriage allowance?
Marriage allowance is a flexible tax relief measure designed to support married couples.
It allows individuals to transfer a portion of their unused personal allowance to their spouse or civil partner.
The personal allowance is the amount of income an individual can earn every tax year before income tax is applied. During the 2023/24 tax year, the personal allowance is £12,570.
If one partner’s earnings do not reach this threshold, they can transfer some of their unused personal allowance to a partner.
As soon as the lower-earning partner’s income exceeds the basic rate threshold, the marriage allowance benefit is removed.
However, it can be reapplied should a partner’s income fall below the basic rate threshold. This is worth remembering should the government opt to raise the personal allowance in future.
What is the difference between marriage allowance and married couples’ allowance?
Marriage allowance and married couple’s allowance are not the same.
The latter is only available where at least one party to a marriage was born before 6 April 1935.
If the couple married before December 5 2005, the allowance was calculated solely on the husband’s income. When a couple married after that date, the allowance is based on the income of the higher earner.
Married couples’ allowance does not reduce the amount of taxable income but it does reduce the overall tax liability.
Due to the date cut-off for qualifying for married couples’ allowance, the number of couples who qualify is relatively small and diminishing. In practice, most married couples and civil partners will qualify for marriage allowance.
However, it’s important you take advantage of any tax benefit to which you may be entitled.
You can find out if you qualify for married couples’ allowance by using the HMRC calculator.
When was marriage allowance introduced?
Marriage allowance was introduced in April 2015 with the intention of simplifying the existing system while providing targeted support to married couples.
The allowance ensures that in couples where there is an imbalance in individual incomes, they can still benefit from the full value of their personal allowances.
This provides targeted support for married couples and can be particularly valuable for couples where one partner is not working full-time due to childcare or other responsibilities, helping to ensure that the couple can retain more of their income.
Marriage allowance is a relatively simple tax benefit to understand and apply for, providing a small tax benefit for married couples and civil partners.
If you have recently entered into a marriage or civil partnership, or married some years ago but were unaware of the tax benefit, the application process is simple.
If it’s some time since you married or entered a civil partnership you may be able to apply for up to four years of backdated marriage allowance.
How does marriage allowance work?
Marriage allowance is a straightforward tax benefit designed to support the income of married couples and couples in a civil partnership.
It allows an individual in a marriage or civil partnership who does not pay tax or earns below the threshold where they become liable for income tax, to transfer 10 per cent of their unused personal allowance to their spouse or civil partner.
The maximum sum that can be transferred through marriage allowance is £1,257, as of the 2023/24 tax year.
In practice, the recipient spouse or civil partner can receive a tax reduction of up to £251.40, which is 20 per cent of £1,257, the equivalent of the basic rate of income tax.
However, it’s important to note that when the lower earner starts to earn more than £11,310, the marriage allowance begins to have less of an impact.
The more of a personal allowance that is used up by the lower earner, the less can be transferred to the higher earner.
The benefit provides a small but valuable benefit that can provide a useful addition to the household income.
Who is eligible for marriage allowance?
To be eligible for marriage allowance, both partners must be married or in a civil partnership.
The partner who is transferring their allowance must be a non-taxpayer or a basic rate taxpayer. The receiving partner must be a basic-rate taxpayer.
It’s important to remember that partners who live together but who are not married or in a civil partnership cannot claim marriage allowance.
Both partners must have been born after April 6 1935.
If either partner is a higher rate or additional rate income taxpayer, then the couple will not be eligible to apply for marriage allowance. This means that the recipient partner must earn between £12,57 and £50,270 (£43,662 in Scotland) for the couple to be eligible.
If you have any questions about your eligibility, for example if one partner’s income fluctuates due to self-employment or changing circumstances, it can be helpful to talk to experienced financial specialists.
This can be particularly useful if marriage allowance forms a part of your wider tax-planning strategy.
Can you claim marriage allowance for previous years?
If you did not claim marriage allowance immediately upon entering into marriage or civil partnership, then you may be able to claim for previous years in which you were eligible.
The maximum number of years you can claim for is the previous four, with the deadline to apply falling on April 5 each year.
That means that were you to first apply for marriage allowance after April 5 2024, you would be eligible to apply for previous years from April 5 2020 onwards.
Marriage allowance benefits over four or more years can soon add up, so it makes sense to claim for any previous years to which you may be eligible.
How to apply for marriage allowance
It’s sometimes mistakenly believed that marriage allowance is automatically applied when a couple marries or enters a civil partnership.
This means that many couples may miss out on tax benefits to which they may be entitled.
To receive marriage allowance, you need to apply through HMRC. This should be done as soon after entering into a marriage or civil partnership as possible.
The application process is relatively simple and can usually be completed in a few minutes.
Both partners will need to provide their National Insurance number, as well as two documents that provide proof of identity.
Currently, HMRC accepts the following form of identity for applicants:
- Your P60
- Your three most recent payslips
- UK Passport
- Information held on your credit file
- The previous three years’ self-assessment tax returns
The easiest way to apply for marriage allowance is online.
You should receive an email confirming your application within 24 hours of your application being submitted.
If you are currently registered for self-assessment, you can make an application through your tax return. It’s also possible to apply for marriage allowance by writing to HMRC.
As long as you meet the eligibility criteria your application will be approved, and you will not have to reapply in future tax years.
Marriage allowance will then be automatically applied every year until your circumstances change. This will usually be because the lower earner begins to earn over the personal allowance, or the marriage or civil partnership comes to an end.
After you have been approved for marriage allowance the tax code of the partner who is recipient of the marriage allowance will change to ‘M’.
This indicates that marriage allowance is forming part of their tax calculation. If the partner who transferred their allowance is employed, their tax code will change to ‘N’. This indicates that they have used their marriage allowance.
Should your circumstances change, your tax code will again be changed to reflect that you are no longer eligible for marriage allowance.
Digital Accounting & Finance can help you reduce your tax liability
At Digital Accounting & Finance (DAAFL), we work with individuals, couples and companies to reduce their tax liability by taking advantage of any tax benefits to which they are entitled.
Our team of specialists offers personal tax advice and can assist with couple tax planning; helping to ensure that you and your family maximise your income and help to build a secure future.
Contact us to find out how personal and business tax and financial planning can reduce your tax liability and increase your income.