What is a Marriage Allowance?

You may have heard the words ‘marriage allowance’ thrown around during certain times of the year, usually self-assessment period but what is it? Marriage allowance is when an individual can transfer 10% of their personal allowance to their spouse or civil partner. Spouse or civil partner must be a basic rate taxpayer to claim Marriage allowance.

Why would I do that?

This will allow a couple where one side does not claim their full personal allowance.

Example

1. For 2021/22, the basic personal allowance is £12,570. Anything you earn more than this, you will pay the basic rate of tax (20%). 10% of £12570 = £1,260 will be transferred to your spouse and you will save a tax up to £252 )1,260 * 20%).
2. The transferor’s personal allowance will drop from £12,570 to £11,310 and the transferee’s personal allowance will increase from £12,570 to £13,830 for the tax year
3. There will be a change in tax code. A M suffix will be added to the transferee and a N suffix will be added to the transferor.

Can it be less than 10% or more than 10%?

No, the allowance cannot be tailored. It will be 10% rounded to the nearest £10 or nothing.

What is the current personal allowance?

The personal allowance will remain at £12,570 for future tax years up to including 2025/26

Here is an example:

Example one:

Lily and Marshall are married. Lily is a stay at home mum whereas Marshall earns £30,000 annually. They claim marriage allowance and transfer £1,260 of Lily’s personal allowance to Marshall. As a result, Lily’s personal allowance is reduced to £11,310 and Marshall’s increases to £13,830. This transfer saves Marshall £252 on tax (£1260 * 20%).

How about an example where both individuals work?

Example two:

Troy has an income of £12,000 and is self-employed.

Vanessa has an income of £18,000.

Troy has £570 left of his personal allowance. They have claimed marriage allowance.

Vanessa’s personal allowance increased to £13,830 and her tax was reduced by £252. Troy’s personal allowance is reduced to £11,310 and has to pay tax on his income of £690 (12,000 – 11,310). This works out to be £138 of tax.

This marriage allowance has helped the couple save £114. (£252 saved by Vanessa less than the additional £138 additional tax paid by Troy).

If you have any more questions, feel free to email us on finance@pfconsult.co.uk