The married couples allowance for 2021/22 is £251. This is tax free cash which an estimated over 2 million couples don’t claim. Better still, you can claim back for the previous 4 tax years. As a result the total tax rebate can be as high as £1,219. This total is explained later.
What is the Married Couples Allowance?
Most taxpayers in the UK have tax free allowances. The most common is the personal allowance, which allows individuals to earn £12,570 (2021/22 rate) tax free before they pay income tax.
Typically, individuals with earnings below the personal allowance will not be able to utilise some of their tax free amount each year. For example an individual with only £7,000 earnings will be throwing away £5,570 of their tax free allowance.
Wouldn’t it be good if you could transfer some of this unused tax free allowance onto your partner, so their tax free allowance is higher? Thus, resulting in them paying less income tax.
This is what the married couples allowance sets out to achieve.
How much of the Personal Allowance can be transferred?
An individual can transfer 10% of their personal allowance. In the tax year 2021/22 the personal allowance is £12,570. As a result the married couples allowance transfer amount is £1,257.
Increasing your partners’ personal allowance by £1,257 will reduce their income tax liability by £251. (Income tax rate is 20% for basic rate taxpayers, therefore £1,257 x 20% equals £251).
How much can you claim?
The married couples allowance reclaim for the tax year 2021/22 is £251. This can be increased to a tax rebate amount of £1,219. This is possible by back dating your claim up to the maximum of 4 years.
This is illustrated as follows:
– 2020/21 tax year – £250 reclaim
– 2019/20 tax year – £250 reclaim
– 2018/19 tax year – £238 reclaim
– 2017/18 tax year – £230 reclaim
Add onto these figures the £251 for the 2021/22 tax year and the total amount is £1,219.
Who can claim the Married Couples Allowance?
To be able to claim the married couples allowance the following conditions must apply:
1. Must be married or in a civil partnership (co-habiting couples don’t count)
2. One individual must earn under £12,570 (2021/22 personal allowance)
3. Their partner must be a basic tax rate payer. Earn between £12,570 and £50,270 (2021/22)
4. Both individuals must be born on or after 6 April 1935
To summarise, you must be a non-taxpayer and your partner is a basic rate taxpayer.
How to claim the Married Couples Allowance?
The easiest way to claim the married couples allowance is to apply online using HMRC portal.
Should you encounter any problems with the online process or if you would prefer to apply over the phone, then HMRC contact number is 0300 200 3300.
IMPORTANT: It must be the non-taxpayer who makes the claim. They are authorising for part of their tax allowance to be transferred.
How to make a claim for the Married Couples Allowance in previous years?
To be able to reclaim married couples allowance for previous years, the conditions must be satisfied for that tax year.
The tax allowance rates change every year so you will need to check for each year that you were a non-taxpayer and your partner was a basic tax payer.
As an example to be able to claim the £238 in the tax year 2018/19, the following conditions apply:
1. You must have been married or in a civil partnership
2. Partner 1 must have earned under £11,850 (Personal Allowance rate 2018/19)
3. Partner 2 must have earned between £11,850 and £46,350 (2018/19 Basic Rate Tax)
4. Both were born after April 1935
What happens after you’ve applied for the Allowance?
First of all, you will receive an email confirming that HMRC has received the application. If successful, the following will happen:
- Claims relating to the tax year 2021/22 will see an adjustment in the tax coding notices. The non-taxpayer tax code will include an N and the basic rate taxpayer will have an M added to their tax code.
- Claims relating to backdated tax years will be paid typically in the form of a cheque.
You don’t need to reapply in future tax years. Typically the tax code will continue to include the married couples allowance.
Married Couples Allowance example
A married couple has partner 1 earning £7,000 per annum and partner 2 earning £32,000 per annum.
Without married couples allowance the income tax liabilities for 2021/22 tax year would be as follows:
| Partner 1 | Partner 2 | |
| Earnings | £7,000 | £32,000 |
| Personal Allowance | £12,570 | £12,570 |
| Taxable Earnings | £Nil | £19,430 |
| Basic Rate Tax Rate | 20% | 20% |
| Income Tax Payable | £Nil | £3,886 |
With married couples allowance claim, the income tax liabilities would be as follows:
| Partner 1 | Partner 2 | |
| Earnings | £7,000 | £32,000 |
| Personal Allowance | £11,313 | £13,827 |
| Taxable Earnings | £Nil | £18,173 |
| Basic Rate Tax Rate | 20% | 20% |
| Income Tax Payable | £Nil | £3,635 |
The tax reduces from £3,886 to £3,635, which is the £251 tax free cash amount mentioned earlier.
Non-taxpayer earns £12,000
The married couples allowance allows for the transfer of 10%, of the personal allowance. It is either 10% or nothing.
Therefore a situation can arise where the non-taxpayer after transferring 10% of their personal allowance will need to pay income tax.
For example a non-taxpayer earning £12,000 can still claim the married couples allowance in 2021/22. Their new personal allowance will be £11,313 and as a result will pay tax on £687, which is £137 tax.
Partner 2 would still be saving £251 in tax, so the total tax paid by both partners will still be lower. In this example it is £114 less tax. It is therefore almost always worth claiming whenever possible.
When should you NOT apply for the Married Couples Allowance?
There is one situation in which you should NOT apply for the allowance. That is where both incomes are close to the personal allowance, with one just below and one just above.
Taking the example above where partner 1 earns £12,000. After transferring 10% of their personal allowance they would pay additional tax of £137.
It is therefore only worthwhile doing the transfer if partner 2 saves over £137 in tax. In this particular example partner 2 would need to earn more than £13,255. Earnings below this amount would result in a net loss.
This situation would be very rare but it is worth checking when both incomes are extremely close to the personal allowance.
Conclusion on the Married Couples Allowance
Per HMRC, an estimated 2 million couples are being offered £251 cash but aren’t claiming it. This can increase to £1,219 if they can claim back the full 4 years.
Don’t be one of those statistics. The claim is easy to do online or over the phone – 0300 200 3300.
DISCLAIMER – Please note that the content contained in this article is for general information only and is not a substitute for professional advice