Once you say “I do”, you sometimes make a raft of guarantees to your partner – and are promised an array of advantages in return. You and your spouse pledge to be by each others’ side for higher or for worse, and to take care of each other in sickness and in health.
There are long-term lifestyle advantages: research shows that married people are inclined to have healthier living habits, comparable to eating more healthily, exercising often and drinking more water.
But there are some advantages from signing on the dotted line which are more tangible in kilos and pence terms. In reality, there’s one marriage profit that may prevent £250 – each 12 months. Here’s what you’ll want to know.
What’s ‘marriage allowance’?
Marriage allowance is a tax perk for couples who’re married or in a civil partnership.
The thought is that if one person is a low earner or doesn’t work (and subsequently doesn’t profit from their entire tax-free personal allowance) they will transfer a few of that tax-free allowance to their spouse or partner.
It is assumed that greater than two million eligible couples miss out on this tax-break, despite it being free and straightforward to use for.
Do I qualify for marriage allowance?
Married couples or civil partners can qualify for marriage allowance if one partner earns lower than £12,570 (the private allowance), and the opposite earns between £12,571 and £50,270 (the fundamental tax rate).
The principles are barely different in Scotland, where the upper earning partner must pay the starter, basic or intermediate rate of tax, which suggests that their income is between £12,571 or £43,662. The lower earning partner must still earn lower than £12,570.
How does marriage allowance work?
For those who are the lower earner, you possibly can effectively transfer 10pc of your tax-free personal allowance to your partner.
In all cases, you have got to transfer £1,260 of your allowance, which effectively reduces your personal tax-free personal allowance to £11,310. Assuming you weren’t using this portion of your tax-free allowance, it will probably as an alternative be put to make use of in reducing your partner’s tax bill – reducing your income tax bill as a pair by a maximum of £252 within the 2024-25 tax 12 months.
Say you earn £11,500 and your partner earns £20,000. You earn lower than the private allowance, so pay no income tax. Your partner pays 20pc tax on the £7,430 above their personal allowance, so has an income tax bill of £1,486.
For those who signed up for marriage allowance, you’d effectively transfer £1,260 of your personal allowance to your partner. Your personal allowance becomes £11,310, whereas your partner can earn as much as £13,830 before tax.
As your income now exceeds your recent reduced personal allowance, you’d actually pay more tax, owing 20pc tax on £190 for a tax bill of £38. Nevertheless, your partner’s taxable income can have dropped from £7,430 to £6,170, meaning their tax bill will fall from £1,486 to £1,234.
Once you add your £38, as a pair your overall income tax bill involves £1,272 – a saving of £214 in comparison with the £1,486 tax bill before marriage allowance was claimed.
Who doesn’t qualify for marriage allowance?
It goes without saying that any couple that doesn’t fall into the principal qualifying category (married or in a civil partnership and with the required income levels) won’t qualify for marriage allowance. Note that the income requirement doesn’t only think about money earned from employment, so when you receive income from dividends or rental income that takes you each over the private allowance, you may find you’re not eligible to say.
But those born on or before April 6, 1935 also don’t qualify for marriage allowance, and can as an alternative have the ability to say married couple’s (and civil partner’s) allowance. If one in all you was born before this date, you might qualify for this – more generous – allowance as an alternative.
This allowance could reduce your tax bill by between £401 and £1,037.50 a 12 months, and you possibly can claim it through a self assessment form or by contacting HMRC with details of your marriage or civil partnership.
Is it at all times price claiming marriage allowance?
Possibly not. If the lower earner has an income that’s near the private allowance threshold of £12,570, and the upper earner only earns barely greater than this threshold, claiming marriage allowance could actually leave you out of pocket.
Say the lower earner has an income of £12,000 and the upper earner earns £13,000. Combined, you’d have a tax bill of £86.
For those who claim marriage allowance – and £1,260 of the lower earner’s personal allowance is transferred to the upper earner – then the lower earner would have a private allowance of £11,310 and the upper earner has a private allowance of £14,570.
The lower earner would earn £690 greater than their personal allowance, so can pay £138 in income tax. The upper earner won’t pay any income tax, because their personal allowance is now higher than their income.
As a pair, their tax bill can be £52 dearer.