Marriage Allowance – potentially £900 in tax savings for free!

By FMB on 

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In the case of married couples/civil partners it is not unusual for one party to be a taxpayer and the other a non-taxpayer.

The ‘tax-free’ Personal Allowance for the current tax year is £11,850.

The total income of the non-taxpayer may well be some way below their £11,850 tax-free allowance meaning that part of their allowance is going to waste. Provided that their partner is a basic rate taxpayer, as is often the case, it is possible to transfer 10% of the non-taxpayer’s tax-free allowance to their tax-paying partner.

The Marriage Allowance started in April 2015 and it is possible to backdate the claim to this date provided that the eligibility criteria are met.

So how is the £900 tax saving calculated?

In the current tax year the Marriage Allowance is rounded up to £1,190 – the basic rate tax saving of 20% for the taxpayer would therefore potentially be £238.

In previous tax years, the tax-free Personal Allowance was lower and the tax savings are as follows:

Year 1 of the Marriage Allowance (tax year commencing 6th April 2015) - £212
Year 2 (April 2016) - £220
Year 3 (April 2017) - £230

If these savings are added to that of the current tax year (£238), the total potential tax saving is £900.

There are of course some rules, the main one being that the Marriage Allowance can’t be claimed for tax years where the taxpayer is either a higher or additional rate taxpayer.

What would you spend the £900 on?

Find out more about Marriage Allowance on GOV.UK.

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