It’s important to note that the rules and eligibility criteria for the Marriage Allowance can change over time. It is advisable to consult with a tax advisor or check with the relevant tax authority to get the most up-to-date and accurate information regarding this benefit.
Since its introduction in 2015, the Marriage Allowance has allowed some married couples and civil partners to reduce their combined tax liability where one partner’s income is less than their tax-free personal allowance. However, it has also caused a degree of confusion in how to claim it, especially where Self-Assessment is a consideration.
If one person in a married couple or civil partnership earns less than £12,570 (the tax-free personal allowance), they have the option to transfer 10% of their personal allowance to their spouse or civil partner. This enables the higher earner to make use of a portion of their partner’s personal allowance, which would otherwise go to waste, resulting in a potential reduction in the couple’s overall tax liability.
To qualify, the higher earner must be a basic rate taxpayer in England or Wales (with taxable income below £50,270) or a basic, starter, or intermediate rate taxpayer in Scotland (with taxable income below £43,662).
In cases where both spouses or civil partners are engaged in Self-Assessment and desire to avail the transferrable marriage allowance, it is recommended by HMRC to submit the transferor’s tax return 72 hours prior to filing the recipient’s return. For instance, consider Mr and Mrs Jones who both annually file tax returns and possess taxable incomes of £10,000 and £20,000 respectively. Mr Jones intends to claim the marriage allowance transfer so that Mrs Jones can benefit from 10% of his personal allowance, which would otherwise go unused. Therefore, it is advisable to file Mr Jones’ tax return first. Subsequently, the couple, or their tax adviser, should wait for a minimum of 72 hours before submitting Mrs Jones’ tax return. This guidance is in line with the practical experience shared by members of the ATT, and it has now been confirmed by HMRC as the most effective method to ensure accurate processing of claims.
If the marriage allowance is being claimed outside of the Self-Assessment process, and both parties also file Self-Assessment tax returns, it is recommended that the claim is not made through the tax return. This is because HMRC’s systems should already be configured to process the marriage allowance transfer in such situations. By not making the claim via the tax return, it helps ensure that the transfer is processed accurately.
Taxpayers who utilize HMRC’s own online tax return completion service to file their Self-Assessment return will receive an automated message if they attempt to claim the marriage allowance during the filing process, informing them that the claim already exists.
For agents who use third-party software to file a client’s tax return, it is advisable not to make the claim through the software in order to facilitate smooth processing of the tax return by HMRC. However, this may result in a different tax position being displayed compared to HMRC’s calculation, which takes into account the marriage allowance transfer. Therefore, tax advisers will need to adjust the tax liability figure when providing advice to affected clients regarding their tax position for the year, and explain the discrepancy compared to the tax return.
Does the claim carry forward?
Where the marriage allowance is claimed outside Self-Assessment, the claim will roll forward in the couples’ PAYE coding notices and tax calculations each year until the transferor advises it should no longer apply.
By contrast, if the claim is made purely via Self-Assessment, it must be made on the transferor’s tax return each