The marriage allowance presents an opportunity to transfer £1,260 of personal allowance between spouses or civil partners. However, it’s important to note that this transfer can only take place if both the recipient and the transferer are not higher or additional rate tax payers.
The marriage allowance is designed as a tax reducer for the recipient, set at 20% of the transferred amount. This translates to an annual value of £252 (£1,260 x 20%). It’s worth noting that this value will remain fixed until at least April 6, 2028, as the current government has frozen the personal allowance until that date.
Interestingly, the “claim” for the marriage allowance must be initiated by the individual surrendering a portion of their personal allowance. This might seem counterintuitive since they are essentially giving up part of their tax-free allowance. Conversely, the recipient of the additional allowance doesn’t need to make a claim actively but rather receives the extra tax benefit passively.
For the individual surrendering the marriage allowance, it is necessary to have unused portions of their personal allowance or a zero-tax liability due to other allowances in operation alongside their personal allowance. To expedite the application process, the quickest method is to apply for the marriage allowance through your online personal tax account available at www.gov.uk/personal-tax-account.
If CB Reid prepare your self assessment tax return, we can review whether a claim would be beneficial and include the claim on your tax return.
Alternatively, you can utilise the downloadable form named MATCF to make a claim. This form allows you to apply for the marriage allowance for the current tax year and retroactively claim it for the previous four tax years, provided the necessary conditions are met.
Once a claim for the marriage allowance is accepted, it will be applied to all future tax years, resulting in a reduced personal allowance of £11,310 for the surrendering spouse. It is important to cancel the claim for the marriage allowance if there are changes in the circumstances of either spouse or civil partner.