Marriage Allowance Explained

Here’s how you can apply for the Marriage Allowance, one of the income tax allowances and reliefs from HMRC that lets one partner transfer up to 10% of their unused personal allowance to another. This means that one person can benefit from some additional tax-free earnings. It can be particularly useful if you are new to self-employment, are still building up your income or income has taken a dip for example due to coronavirus.

I’ve updated this post on 18 January 2021

Who Can Apply for the Marriage Allowance Tax Rebate

Every in the UK is entitled to apply for a tax rebate, as long as they meet all the following criteria:

  1. Be married or in a civil partnership;
  2. One partner does not earn anything or earns below the personal allowance (£12,500 for 2020/21 and 2019/20);
  3. The other partner pays tax at the basic rate of 20%.

How Does The Marriage Allowance Work

Here’s an example of how the marriage allowance works.

Mary went self-employed in the tax year 2020/21 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 and pays tax at the basic rate of 20%. Under the rules of HMRC marriage allowance, Mary can transfer up to 10% of her unused personal allowance to Jo of £1,250 for 2020/21 (£12,500 x 10%).  By transferring this Jo’s personal allowance increases to £13,750 (£12,500 + £1,250).

This equates to a tax rebate of £250 at 20%.

Claiming Backdated Marriage Allowance Tax Rebate

You can backdate your claim for marriage allowance up to 4 tax years, to claim a rebate for any tax years you have missed.

This means you and your partner could benefit from a tax saving of £967 looking back from the current tax year.

Tax YearPersonal Allowance10% TransferMaximum Tax Saving
2020/21£12,500£1,250£250
2019/20£12,500£1,250£250
2018/19£11,850£1,185£237
2017/18£11,500£1,150£230
2016/17£11,000£1,100£220
2015/16£10,600£1,060£212
The Marriage Allowance Tax Rebate

How to Claim the Marriage Allowance Tax Rebate If You’re Employed

If you are employed by someone, then you can apply online for marriage allowance on the .GOV website.  Alternatively, you can apply by phone HMRC on 0300 200 3300 for help.  Your employer will be notified by HMRC to change your partners’ tax code to reflect the transfer of personal allowance.

It can take up to a couple of months to take effect, so don’t delay in getting the process underway.

How to Claim the Marriage Allowance If You’re Self Employed

If you are self-employed you’ll need to apply for marriage allowance when you fill in your tax return.  You will need to add details of your partner, including their national insurance number.

Marriage allowance
Claiming the Marriage Allowance Tax Rebate on Your Tax Return

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 tax bill when they file their tax return.

Cancelling Marriage Allowance

Once you have applied for the allowance, it will be transferred every tax year moving forward, so you’ll need to make sure you cancel it if your circumstances change. Again you can do that online or by calling HMRC.

About Anita Forrest

Anita Forrest is a Chartered Accountant, spreadsheet geek, money nerd and creator of www.goselfemployed.co - the UK small business finance blog for the self-employed community. Here she shares simple, straight-forward guides to make self-employment topics like taxes, bookkeeping and banking easy to understand.