HM Revenue & Customs (HMRC) is enhancing the Personal Tax-Free Allowance for taxpayers with the ‘M’ tax code, which signifies the Marriage Allowance. This allowance allows one partner to transfer 10% of their Personal Allowance to the other, potentially reducing the couple’s overall tax bill.
Marriage Allowance enables an individual to transfer £1,260 of their Personal Allowance—the amount of income you can earn tax-free—to their spouse or civil partner. This transfer can decrease the recipient’s tax by up to £252 over the tax year, which runs from 6 April to 5 April the following year.
To qualify, the lower-earning partner must generally have an income below their Personal Allowance, usually £12,570, meaning they do not pay Income Tax. Meanwhile, the receiving partner typically pays tax at the basic rate on income between £12,571 and £50,270.
READ MORE: Marks & Spencer to Close Swansea Oxford Street Store, Putting Over 90 Jobs at Risk
Here’s an example from HMRC: If Partner A earns £11,500 and their Personal Allowance is £12,570, they pay no tax. Partner B earns £20,000 and pays tax on £7,430. By transferring £1,260 of Partner A’s allowance to Partner B, Partner A’s taxable income becomes £190, while Partner B’s taxable income reduces to £6,170. This adjustment lowers the couple’s combined taxable income from £7,430 to £6,360, saving them £214 in tax.
It is important to note that claiming Marriage Allowance could increase tax liability for the lower earner, but overall, the couple benefits from the tax savings. To apply for or learn more about Marriage Allowance, you should contact HMRC’s Income Tax helpline, especially if you have other income sources like dividends, savings, or receive benefits at work, or if you are unsure about your taxable income.
Marriage Allowance is available only to married couples or civil partners. Couples living together without formal marriage or civil partnership cannot claim this benefit.