Marriages and Civil Partnerships are often more than just the next step in many relationships.
They also offer various financial and legal benefits to both parties.
However, one often overlooked aspect is the potential tax relief you can receive from the Marriage Allowance.
What is Marriage Allowance?
Marriage Allowance is a tax benefit that allows spouses or civil partners, where one partner has an income below the Personal Allowance threshold, to transfer a portion of this allowance to the other.
This can lead to a reduction in the amount of tax paid by the higher earner.
Eligibility:
To be eligible for the Marriage Allowance, one partner must have an annual income below the Personal Allowance limit which is currently set at £12,570.
This situation may arise if one is not working, is in a low-paid or part-time role, or is retired.
The other partner must be a basic rate taxpayer, with an income ranging from £12,571 to £50,270 per annum.
The benefits:
When the lower earner transfers up to £1,260 of their Personal Allowance to their higher-earning partner, the recipient’s Personal Allowance increases to £13,830.
This adjustment means that they will pay tax on a smaller portion of their income, potentially saving up to £252 each year.
However, this does reduce the Personal Allowance of the one who transfers it, meaning that if the lower-earning partner earns above £11,310 per annum they will be required to pay tax on earnings above that.
Whilst this sounds like it reverses any benefits, the couple will still save more money by taking advantage of the Marriage Allowance.
Application process
Applying for the Marriage Allowance can be done through the official Government website, provided you meet the criteria outlined.
Couples where one partner was born before 6 April 1965 are better off applying for the Married Couple’s Allowance, which can provide higher savings per annum.
Furthermore, it is possible to backdate claims to include any tax year since 5 April 2019, allowing for further tax reductions.
If you are still unsure whether the Marriage Allowance will benefit you and your partner, our experts are on hand to help.
Get in touch with our team today to find out more about how the Marriage Allowance could benefit you and your partner.
