Marriage has many benefits; providing you are married to the right person, of course!
Not only do you get to share your life with somebody, you also get to share your finances. A dual income can be useful whether you are a newlywed or an old married couple, but what happens when the Taxman takes more than his fair share?
According to research from Royal London, over two million couples are missing out on a recently introduced tax break, potentially worth hundreds of pounds.
Are you one of the many losing out? And if so, how can you claim it back?
What is the marriage allowance?
Launched in April 2015, the marriage allowance essentially allows couples to pass some of their unused personal allowance between each other, providing:
- You are married or in a civil partnership
- One of you is a basic-rate taxpayer
- The other half isn’t paying tax
The allowance allows the non-taxpayer, earning less than £11,500, to transfer up to £1,150 of their unused tax allowance to the basic-rate taxpayer.
This equates to a tax break of £230 per year for the couple. However, the past two years can be backdated, giving a total saving of £662.
This sounds like a good deal, why aren’t people claiming?
According to H M Revenue and Customs (HMRC ), around two million couples are failing to claim the marriage allowance, meaning they are missing out on a total of £1.3 billion.
The relatively high number of people missing out are doing so for a number of reasons, but primarily, people simply don’t know that the marriage allowance exists. In the 2015/16 tax year, 644,916 people claimed, rising to 2.2 million the following year. Whilst this jump is encouraging, it still leaves two million couples out of pocket.
Steve Webb, Director at Royal London, commented: “The take-up of the new allowance is shockingly low. Even in its third year of operation, around two million couples who could benefit from the marriage allowance are not doing so. When family finances are so tight, I would encourage every married couple to check whether they might be eligible, including for the past two years, as they could qualify for a useful lump sum as well as a reduction in their ongoing tax bill.”
How can I claim the allowance?
Despite the name, the allowance isn’t available to every married couple. The first step to claiming is to confirm that one of you is a basic-rate taxpayer, and the other is a non-taxpayer.
The next step is completed online, and requires:
- National Insurance number
- Proof of identity
For both partners.
The online form is available here, and allows claims to be backdated to when the allowance was introduced. To be eligible for the entire £662 rebate, both partners need to satisfy the criteria for each year they are claiming for.
It is worth noting that the personal allowance hasn’t always been the current level of £11,500, so the non-taxpayer’s earnings must have been:
- Below £11,000 for the 2016/17 tax year
- Below £10,600 for the 2015/16 tax year
The basic-rate taxpayer must also have earned under £45,000 for the past three years to qualify.
As a certain supermarket says; every little helps, and a rebate of £622 makes all the difference. At a time when a quarter of UK households have under £100 in savings (Source: Aviva ), paying unnecessary tax can prevent families from falling into financial difficulty.
For more information, about the marriage allowance, and ensuring that you are paying tax as efficiently as possible, get in touch using the number at the top of the page.