Are you married or in a civil partnership? If so, is one of you a non-taxpayer, and the other paying basic 20 per cent tax?
If you’ve just answered yes, then you’re one of 4.1 million couples due a free £212 a year, but the likelihood is you’re in the 80 per cent who haven’t claimed it, so I’m going to tell you how.
This is all about marriage tax allowance, a tax-break introduced in April 2015. I was stunned to find out how few people know about it, and am starting to make a breakthrough. To inspire you, here’s just a few of the scores of recent tweets I’ve got on it.
TingTing: @MartinSLewis THANK YOU! Just signed up for marriage allowance, £212 in our pocket. DO IT PEEPS ... it’s quick and simple to do!
Matty: @MartinSLewis Thank you for letting us know about the Marriage Tax Allowance. Only took 2 minutes to complete and £212 saved per year.
Q Who can get it? You must be married or civil partners. If you’ve lived together for 20 years and have four kids and a dog, you are not eligible. This is a bit of social engineering by the government to have a reward for marriage in the tax system.
One of you must be a non-taxpayer, ie, usually earning less than £10,600, and the other needs to pay tax at the basic 20 per cent rate, which is currently for those who earn under £42,385. You both must be under 80 (then there’s another tax break).
Don’t overcomplicate this. Many people ask if they count as a non-taxpayer as “I’m a volunteer”, “I only work part time”, “I don’t work”. Stop it. Are you a UK resident who doesn’t pay income tax? If you are, you count – simple as that.
Q How does it work? The non-taxpayer can transfer £1,060 of their personal allowance – that’s the amount you can earn tax-free – to their partner.
Imagine Tyrone earns £10,000 at a garage, and is a non-taxpayer. He can arrange for £1,060 of his tax-free allowance to be transferred to his wife Fizz. So that’s £1,060 of earnings she would’ve paid tax on at 20 per cent that’s now tax free. As 20 per cent of £1,060 is £212, that’s your gain.
Q How do you claim it? It’s a really simple process. The non-taxpayer should just go to www.gov.uk/marriage-allowance or call 0300 200 3300. You’ll need your national insurance numbers and some basic ID. Let me stress again though, it’s the NON TAXPAYER who must sign up – people do it the other way round and then wonder why they’re rejected.
Q Do I get it every year? Yes, it’s done via a change in your tax code that remains, so it’s £212 a year gain every year and once you’ve applied it’s done automatically. If your circumstances change, you need to call up and tell them.
Q Can I backdate the claim? Yes, you can backdate for four years, but it only started on April 6, 2015 so of course you can’t go back further than that.
Q What if either or both of us are self-employed? It doesn’t matter. As long as you fulfil the eligibility criteria above, you can apply. The only difference is if the recipient partner is in self-assessment, it will reduce their self-assessment bill.
Q What if I’m a non-taxpayer who doesn’t have £1,060 to pass across? It still works, it’s just a bit more complex if the non-taxpayer is earning just under the £10,600 threshold. This is because you have to transfer £1,060 of your allowance to take advantage – nothing more, nothing less.
So let’s do another example. Suppose Fred is a basic rate taxpayer married to Wilma who earns £10,000 a year, so she’s only got £600 left of her tax-free allowance. She can still move £1,060 to Fred, so he gains £212 on that amount.
That lowers her allowance to £9,540, but she earns £10,000 so she’ll pay basic 20 per cent tax on the £440 – meaning she is £88 worse off. Overall, though they’re still up over £100.
If you don’t get the maths, don’t worry, you’re always collectively up by doing this, so if you’re a non-taxpayer, even close to the limit it’s still worth applying.
n Martin Lewis is the founder & editor in chief of Money Saving Expert. To join the 10 million people who get his Martin’s Money Tips weekly email, go to www.moneysavingexpert.com/latesttip