The Marriage Allowance (previously referred to as the Transferable Allowances for Married Couples and Civil Partners) was introduced on 6 April 2015.

From 6 April 2015 a spouse or civil partner who is not liable to income tax above the basic rate may transfer 10% (£1,250 for 2020/21) of their personal allowance to their spouse/civil partner, provided that the recipient of the transfer is not liable to income tax above the basic rate.

This acts as a tax reducer, rather than an increase of personal allowance for the recipient spouse. The recipient's tax is reduced by the transferred amount multipled by the basic rate, or Scottish basic rate of income tax as the case may be. For example, the maximum tax reduction for the transferee is £250 for 2020/21.

You cannot choose to transfer a lower amount to your spouse/civil partner, it has to be the maximum amount of 10% of your personal allowance. If your income is less than the personal allowance but not less than 90% of the personal allowance you may have more tax to pay as a result of the transfer. 

Taxpayers have 4 years in which to make the election. You can backdate your claim to include any tax year since 5 April 2015 that you were eligible for Marriage Allowance within the 4 year claim period.

The Marriage Allowance may be claimed if all the following apply:

  • you are married or in a civil partnership.
  • you are not for the tax year, liable to tax at a rate other than the basic rate, the dividend ordinary rate or the starting rate for savings. if you have income above the personal allowance however a transfer may not benefit you and your spouse/civil partner as couple.
  • your spouse or civil partner has an annual income of between £12,500 and £50,000 (2020/21)
  • no claim has been made for a Married Couples Allowance, which is available where one or both of the couple were born before 6 April 1935.

Taxpayers have to use online registration in order to claim to transfer the allowance, see HMRC How to apply.

PAYE tax codes

Codes will be adjusted as follows:

  • M for the spouse receiving the allowance.
  • N for the spouse transferring the allowance.

Transfer of allowance on death

In his Autumn 2017 Budget, the chancellor announced that it would be possible to claim Marriage Allowance where one (or both) spouse has died during the tax year. The claim can be made after 29 November 2017 and can be backdated up to four years (though not before 6 April 2015). This is included in Finance Act 2018. The change means that an election is available to couples on death where it was not previously in life because one of them was a higher rate taxpayer. If, in the year of death, the higher earning deceased spouse or civil partners income remains within the basic rate band because of their death, the transfer will be available whereas in previous years their income levels may have been too high. 

Where it is the transferor who dies, the transferee retains their full personal allowance for the year whereas when it is the other way around (transferee dies) their allowance is reduced accordingly. Depending on income levels it may be more beneficial for the surviving spouse to transfer to the deceased rather than vice versa.

Separation and divorce

The allowance ceases to be available for transfer the year after divorce or the dissolution of a civil partnership. There is no requirement for spouses or civil partners to be living together when transferring/receiving the allowance meaning it can still be transferred after separation. 

Small print

Sections 55A - 55E Income Tax Act 2007 contain the rules on the Marriage Allowance tax reducer and were introduced by Finance Act 2014, with effect from 6 April 2015.

 

Comments (2)

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The non-taxpayer has to have enough of their allowance unused to use this in full
Therefore, if they earn £12,000 they can only pass £500 of the allowance on to the basic rate tax-paying spouse
If they earn/receive less than £11,250 (based on...

The non-taxpayer has to have enough of their allowance unused to use this in full
Therefore, if they earn £12,000 they can only pass £500 of the allowance on to the basic rate tax-paying spouse
If they earn/receive less than £11,250 (based on 2020/21 allowances) then the full allowance can be transferred (I am an IFA and came across this once with a client)

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This comment was minimized by the moderator on the site

Marriage allowance transfer
You say "From 6 April 2015 a spouse or civil partner who is not liable to income tax above the basic rate may transfer up to 10% (£1,250 for 2020/21) of their unused personal allowance to their spouse/civil partner"
(Th...

Marriage allowance transfer
You say "From 6 April 2015 a spouse or civil partner who is not liable to income tax above the basic rate may transfer up to 10% (£1,250 for 2020/21) of their unused personal allowance to their spouse/civil partner"
(The important words are "up to")

HMRC (and current legislation) does not say "up to": it is all or nothing.
Who is correct?

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