Martin Lewis, 54, has highlighted how married couples can increase their tax-free allowance by over £1,000 through HMRC's Marriage Tax Allowance. The BBC and ITV star explained the process, which allows a non-taxpaying spouse to transfer 10% of their Personal Allowance to their partner, resulting in a significant tax saving.
How the Marriage Tax Allowance Works
Lewis said: "So here's how it works, it has to be a non-taxpayer, so that's someone earning under the £12,570 a year Personal Allowance, the amount that you can earn each year tax-free, married to a basic rate 20% taxpayer." He added: "The non-taxpayer can go to gov.uk and apply to give 10% of their Personal Allowance to the taxpayer. So they now get both. Which means, the net effect is, the non-taxpayer now has £11,310 a year they can earn tax-free, which will hopefully cover most of what they do earn."
Financial Gain and Backdating
The gain for the current tax year is £252 because the spouse has an extra £1,260 that they are not paying 20% tax on. Crucially, this allowance can be backdated for four previous tax years, leading to a total benefit of around £1,000. Lewis explained: "The times five, is crucial. Because with the Marriage Tax Allowance you can back claim four tax years, so you can get this tax year, which is done by altering your tax code, and you can go back four prior tax years, which is about £1,000 benefit, which you get as a cheque, or through BACS, assuming of course that you were eligible for it."
Official Guidance from Money Helper
Money Helper states: "Marriage Allowance means the partner who earns more will get £1,260 added to their basic Personal Allowance. Of the amount of money transferred to a partner as part of Marriage Allowance – 20% is given as a reduction in their tax bill. This is different from Personal Allowance – which is deducted from taxable income before tax is worked out." The tax code of the partner receiving the allowance usually changes to 'M'.
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