The Little-Known Tax Perk of Being Married

The marriage allowance is a scheme to give income tax relief to married couples, but it does only apply to those couples with very specific circumstances. Here, we discuss those circumstances and provide an example that will be useful to those who are studying for any of the CII CF1, R01, R03, R06, AF1, or AF5 exams.

THIS ARTICLE IS RELEVANT TO EXAMINABLE TAX YEAR 2019/20.

Let’s remind ourselves of the circumstances that need to exist for the Marriage Allowance to apply:

• Firstly, couples need to be married or in a civil partnership
• The spouse wishing to transfer must have an income of less than £12,500
• The spouse receiving the transferred allowance must not be a higher rate taxpayer
• The receiving spouse must be resident in the UK for tax purposes
• The amount that can be transferred in the 2019/20 tax year (and 2020/21) is limited to £1,250

This, therefore, only benefits couples where one doesn’t earn enough income to use their full personal allowance (less than £12,500) and the other one is paying tax at no more than the basic rate.

For those born before  6 April 1935, it is probably more beneficial to claim the (more generous) married couple’s allowance instead (you can still apply for the marriage allowance, but it’s not possible to receive the marriage allowance and the married couple’s allowance at the same time).

Let’s look at an example:

Barbara receives an annual State pension of £4,000. Her personal allowance is £12,500 so she can transfer the full £1,250 to her husband, Michael. Michael is also retired and receives £15,000 per year, made up of private and State pension. His personal allowance can, therefore, be increased from £12,500 to £13,750. The 20% saving on this extra bit of allowance is equal to £250.

Some older couples may not know about this extra tax perk, and the fact they will have to make an online claim may also deter some people.

A claim can be backdated to include any tax year since 5 April 2016 someone was eligible for. The application must be made by the person wishing to make the transfer (i.e. the non-taxpayer) – more information can be found on the gov.uk website.

Both national insurance numbers will be needed, as well as information to identify the non-taxpayer, but it really is quite a simple process.  The system confirms eligibility based on the facts given. If the application is then successful, any backdated claim will be received by cheque, and for the current tax year, HMRC amends PAYE codes.

Grab the resources you need!

If you’re studying for your CII R03 exam, and you don’t feel 100% confident of a pass, grab our free taster to try out one of Brand Financial Training’s mock exam papers for yourself.  Click the link to download the R03 mock exam taster now!

Alternatively, you can download the taster for CF1, R01, R06, AF1, or AF5 if any of those exams is causing you to worry.