FOUR MILLION FAIL TO CLAIM MARRIAGE ALLOWANCE

Up to four million married couples and civil partners are missing out on a new tax allowance that is worth £212 this year. 

The Marriage Allowance was announced in the 2013 Autumn Statement and allows a spouse (or civil partner) to transfer up to £1060 of their 2015/16 tax allowance to their partner if (a) their income is below the tax threshold (currently £10,600 a year) and (b) their spouse does not pay higher rate tax which begins on incomes above £42,385 a year. Both must also be born after 5 April 1935 because older couples get a bigger tax break - see Marriage Tax Breaks.

When the policy was announced the Government said that 4.2 million couples would be eligible. However, estimates of the cost of the allowance by the Treasury indicate that it expected only around 2.5 million to claim it in 2015/16 rising to no more than 3.25 million by 2017/18. 

But even those numbers have now been shown to be hopelessly optimistic.

HMRC figures given to Oliver Letwin MP in September show that only 165,000 had actually got the allowance. A similar number were said to be in the process of applying for it. Even if all their claims are successfully made by April that will still leave nearly four million couples without it and the Treasury saving £400 million off the expected cost of the measure this year and £890 million off the cost if everyone entitled claimed.

My requests to HMRC for more up to date figures have been refused. "We are not saying very much...
any figures we release...won’t be representative of the level of demand"

How it works
If a couple qualifies then the non-taxpayer can transfer £1060 of their unused personal allowance to their spouse. That will save the taxpaying spouse basic rate tax on that amount which is £212 a year (£17.66 a month or £4 a week).

The transfer can only be for the full amount of £1060. That can be done even if the person transferring the amount has an income close to their personal tax allowance. So someone with an income of £10,000 who is a non-taxpayer can transfer the full £1060 leaving themselves with a personal allowance of £10,600-£1060=£9540. So they will start being a taxpayer and pay basic rate tax on £10,000-£9540=£460 ie a tax bill of £92. Their spouse will save £212 leaving the couple £120 better off.

The future
In future years the Marriage Allowance will rise. It is fixed at 10% of the personal tax allowance. So on present plans it will be £1100 in 2016/17, £1120 in 2017/18, and £1250 by 2020/21.

Claiming and payment
You can claim the allowance online or through the income tax helpline 0300 200 3300. You will need National Insurance numbers and dates of birth for you and your spouse. Lines are open 0800-2000 Mon-Fri or 0800-1600 Saturday. You can also claim by sending a letter with your details to Pay As You Earn, HM Revenue and Customs, BX9 1AS. That might take longer.

Once the transfer is done the spouse receiving the extra allowance will have a suffix M added to their tax code and the code will be 106 higher, representing the full £1060 transferred. The one making the transfer will have a suffix N and their tax code will be 106 lower. 

It will be backdated to the start of the tax year and then reflected in a reduced amount of tax each month. 

HMRC says that the process is now simple and quick and that is confirmed by many on my twitter timeline who have got the allowance. 

The Marriage Allowance is only available to married couples and civil partners. It is not available to other couples.

More in Marriage Tax Breaks including allowances for older couples and blind people.

9 November 2015
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