Is claiming Marriage Tax Allowance worthwhile?
In April 2015, Marriage tax allowance was introduced in the UK by the then Tory government led by David Cameron.
When this ‘allowance’ was initially announced in 2013, David Cameron wrote in the Mail 1 ‘From April 2015, if neither of you are higher rate taxpayers, you will be able to transfer £1,000 of your tax-free allowance to your spouse.
Later he tweeted ‘The £1,000 marriage tax allowance will apply to straight and gay couples, as well as civil partners. Love is love; commitment is commitment.’
The marriage tax allowance allows you to transfer 10% of your personal allowance (the amount you can earn tax-free each tax year), to your spouse or civil partner, if they earn more than you.
The marriage tax allowance for the tax year 2019/20 is up to £250. However, you can get a rebate by back-claiming by up to four years. The amounts for each year are:
- 2015/16 – £212
- 2016/17 – £220
- 2017/18 – £230
- 2018/19 – £238
- 2019/20 – £250
This means that if you claim now and backdate, so you get this year’s, and all the previous years’ allowance, you’ll get up to £1,150. You’ll be paid money for previous tax years as a cheque.
To benefit from claiming marriage allowance, the lower earner must have an income of less than the personal allowance (£12,500 for 2019/20) and their partner must have an income of more than the personal allowance, but not more than the level at which higher rate tax becomes payable. For 2019/20 this equates to income between £12,500 and £50,000.
Example
Ann and John are married and living together. Ann is a stay-at-home mum to their son Peter. John earns £25,000 from his job as a builder.
They claim the marriage allowance for 2018/19 and 2019/20
For 2019/20 the personal allowance is £12,500. 10% of Ann’s personal allowance (i.e. £1,250) is transferred to John. Her personal allowance is reduced to £11,250 (£12,500 – £1,250) and John’s personal allowance is increased to £13,750 (£12,500 + £1,250).
For 2018/19 the transfer is £1,185, leaving Ann with a personal allowance of £10,665 and John with a personal allowance of £13,035.
Where the marriage allowance is claimed, this will be reflected in the tax codes of both parties. The recipient will have a tax code with an M suffix and, if the transferer is employed or receives a pension, their tax code will have an N suffix.
So, this is a substantial benefit to middle-class families and the answer to the question posed in the title of this article is a resounding YES, it is worthwhile.
Date: 07/02/2020