Accounting News

Marriage tax allowance - Are you missing out?

Act now - Marriage Allowance for 2015/16 expiring on 6th April 2020

Tuesday 24 March, 2020

Although local St Albans, Welwyn Garden City and Hemel Hempstead small and medium businesses are rightly focused on the coronavirus, it’s important their employees don’t miss out on the Marriage Allowance and act before it expires. As your local accountants, we want to ensure we provide Tax Tips to everyone, especially in these difficult times.

Who is eligible for the marriage tax allowance?

Two million people who are eligible for marriage tax allowance are missing out. Act ASAP or you could lose £212 of £1,150 you may be due. To be eligible for the marriage tax allowance (MTA) you must be married or in a civil partnership and one of you must be a non-taxpayer, the other a basic 20% rate taxpayer.

For example: take a local married couple living in Welwyn Garden City where one partner works, then the non-taxpayer can transfer 10% of their tax-free allowance to the taxpayer. This year, that means transferring £1,250, on which the couple save 20% tax - so a £250 gain.

Marriage tax allowance claims can be backdated by up to four years

You can backdate claims by up to four years (on top of the 2019/20 tax year), currently a total gain of £1,150 (once you're claiming, you get it year after year). The scheme launched in 2015/16, and to claim for that year, you must do it by Sunday 5th April - if not, you lose £212.

Chris Wallace, Managing Director, Visionary Accountants, St Albans Hertfordshire said: ‘Our local Visionary accountancy team work with many SMEs in St Albans, Welwyn Garden City and Hemel Hempstead and we always advise them to speak to their employees about the Marriage Allowance as it really is very simple, and only takes a few minutes to complete the application form at HMRC. To do it, you will need both your national insurance numbers and one of a range of different acceptable forms of ID for the non-taxpayer.  If there's a problem doing it via the web, just call 0300 200 3300 and do it by phone. It's worth noting you can only apply for those years in which you both met the criteria. So, for example, if you earned more than the £11,000 personal allowance in 2016/17, HMRC won't allow you to claim it.’

If the taxpayer applies, you're doing it the wrong way around and it won't work.

After going through the application process, you’ll immediately be informed that your application has been received via email (you can apply over the phone too). If you were also eligible for the allowance in previous tax years, you'll have to select this option as part of the application process.

Although the onus is on you to check you're eligible, HMRC will write to inform you if you're not – although you may have to wait a few weeks.

Act now if you want to apply retrospectively for previous tax years

There's no cut-off date to apply (but if you want to apply retrospectively all the way up to tax year 2015/16 you need to do so before 6 April). When you're applying for the current year, it's paid via your tax code over the remaining months of the tax year; so this will need to be updated by HMRC.

You do NOT have to apply every year. Your personal allowance will transfer automatically to your partner until one of you cancels the marriage allowance or you inform HMRC that your circumstances have changed, eg, because of divorce, employment pushing you into a higher-rate tax threshold or death.

Once you've applied, you (or your partner) will get the extra allowance either:

  • By changing the higher earner's tax code, which can take up to two months.
  • When they file their self-assessment tax return.

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