HMRC is boosting the Personal Tax-Free Allowance with one tax code. The letter ‘M’ stands for Marriage Allowance, meaning you’ve received a transfer of 10% of your partner’s Personal Allowance.
Marriage Allowance lets you transfer £1,260 of your Personal Allowance to your husband, wife or civil partner. Your Personal Allowance is the amount you can earn before paying tax.
This reduces their tax by up to £252 in the tax year (6 April to 5 April the next year). To benefit as a couple, you (as the lower earner) must normally have an income below your Personal Allowance – this is usually £12,570.
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You can calculate how much tax you could save as a couple. You should call the Income Tax helpline instead if you receive other income such as dividends, savings or benefits from your job. You can also call if you do not know what your taxable income is.
When you transfer some of your Personal Allowance to your husband, wife or civil partner you might have to pay more tax yourself, but you could still pay less as a couple.
HMRC gives the example, saying: “Your income is £11,500 and your Personal Allowance is £12,570, so you do not pay tax.
“Your partner’s income is £20,000 and their Personal Allowance is £12,570, so they pay tax on £7,430 (their ‘taxable income’). This means as a couple you are paying Income Tax on £7,430.
“When you claim Marriage Allowance you transfer £1,260 of your Personal Allowance to your partner. Your Personal Allowance becomes £11,310 and your partner gets a reduction of £1,260 on their taxable income.
“This means you will now pay tax on £190, but your partner will only pay tax on £6,170. As a couple you benefit, as you are only paying Income Tax on £6,360 rather than £7,430, which saves you £214 in tax.”
You can benefit from Marriage Allowance if you’re married or in a civil partnership, you do not pay Income Tax or your income is below your Personal Allowance (usually £12,570) and your partner pays Income Tax at the basic rate, which usually means their income is between £12,571 and £50,270 before they receive Marriage Allowance,
You cannot claim Marriage Allowance if you’re living together but you’re not married or in a civil partnership.
