Self Employed Tax Tip: Marriage Allowance

Marriage Allowance

The HMRC Marriage Allowance is a tax perk that allows one partner to transfer up to 10% of their unused personal allowance to another meaning that person can benefit from some additional tax free earnings. This can be useful if you are newly self employed or in the early stages of starting a business and your earnings are low.

Who Can Use the HMRC Marriage Allowance

To use the HMRC marriage allowance you and your partner must meet the following three pieces of criteria:

  • be married or in a civil partnership;
  • one partner does not earn anything or earns below the personal allowance (£11,850 for 2018/2019);
  • the other partner pays tax at basic rate (20% of earnings up to £34,500 for 2018/2019).

How Does HMRC Marriage Allowance Work

Here’s an example of how the HMRC marriage allowance works when you are self employed. Mary went self employed in the tax year 2018/2019 and the profits from her business were £5,000 as she was in the start up phase.  Her partner Jo was in full time employment earnings £35,000 and paying tax at basic rate.

Under the rules of HMRC marriage allowance, Mary can transfer up to 10% of her unused personal allowance to Jo of £1,185 to Jo.  By transferring this Jo’s personal allowance increases to £13,035, which equates to a tax saving of £237 at 20%.

Marriage allowance

How to Apply for Marriage Allowance When You’re Self Employed

When you are self employed you need to apply for marriage allowance on your self assessment tax return.  You will need to add details of your partner, including their national insurance number.  If your partner is employed then an adjustment will be made to their tax code by their employer. If both you and your partner are self employed, then the recipient will see a reduction in their self assessment tax bill, once they have filed their tax return.

Claiming Backdated HMRC Marriage Allowance

If you are self employed and were eligible for the HMRC marriage allowance in 2015/2016 when it was introduced, then you can actually make a backdated claim for up to four years.

This means you and your partner could benefit from a tax saving of £899 by putting in a backdated claim for marriage allowance on your self assessment tax returns.

Tax Year Personal Allowance 10% Transfer Tax Saving at Basic Rate
2018/2019 £11,850 £1,185 £237
2017/2018 £11,500 £1,150 £230
2016/2017 £11,000 £1,100 £220
2015/2016 £10,600 £1,060 £212


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