HMRC is increasing the personal tax-free allowance for UK households by £1,260, raising it to £13,830 through the Marriage Allowance scheme. This tax break allows one spouse or civil partner to transfer part of their unused personal allowance to their partner, reducing their overall tax bill.
How Marriage Allowance Works
The Marriage Allowance works by reducing the personal allowance of the donor spouse or civil partner. The donor gives up £1,260 of their allowance, which is transferred to the recipient. This provides a tax reducer (tax credit) to the recipient, lowering their tax liability. It is important to note that the allowance is not strictly an allowance in the hands of the recipient but rather a reduction in their taxable income.
The donor spouse or civil partner must make the claim for Marriage Allowance. UK Property Accounts explains the process with an example: "Imagine Sarah is a stay-at-home parent, earning nothing, whereas her partner James brings home £40,000 a year. Because Sarah isn’t using her full Personal Allowance, she can transfer £1,260 of it to James. This means James’s taxable income falls by £1,260, saving the couple £252 in tax for the year."
Backdating Claims for Maximum Benefit
If couples have not claimed the Marriage Allowance before, they can backdate their claim for up to four tax years. That means they could receive a lump sum of £1,008 (£252 x 4) from HMRC. Adding this to the £252 they will save in the current tax year, they could receive a total of £1,260 back in their pockets.
Adjusting Tax Codes
Once a claim is made, HMRC will adjust the recipient's tax code to reflect the change, effectively boosting their tax-free Personal Allowance from £12,570 to £13,830 for the year.
Why Many Miss Out
The scheme is not widely known. UK Property Accounts notes: "You might be wondering why this is not common knowledge. After all, who would not want an extra £252 a year? The truth is, many people do not know the Marriage Allowance exists. HMRC does not exactly shout about it, and unless you are a tax nerd or have a particularly clever accountant, it is easy to miss."
Another reason is that the rules can feel restrictive. Higher-rate taxpayers (earning above £50,270) are not eligible. If both partners earn more than £12,570, they also cannot benefit. However, for those who qualify, applying can provide significant savings.
