To benefit from the marriage allowance, the lower earner must apply to Marriage Allowance Benefit to request any unused personal allowance can be transferred to their spouse. Those earning less than the personal allowance can transfer a maximum of £1,250 in 2019-20 to their partner’s allowance. If you decide to transfer any of your unused personal allowance, you must transfer all of it. If you earn less than £11,250 (the personal allowance, minus £1,250), you can do this without being liable to pay any tax.

In 2019-20, those earning above £11,250, but below £12,500 can still transfer £1,250 of allowance, but will become liable to pay tax on any income in excess of £11,250. Their partner still makes a tax saving of £250, but the extra tax they pay reduces the overall level of saving made by the couple. This allowance will transfer to the spouse automatically every year unless you contact HMRC to cancel it, or your marriage comes to an end (either through divorce or death).

Example

Your income is £11,500 and your Personal Allowance is £12,500, so you don’t pay tax.

Your partner’s income is £20,000 and their Personal Allowance is £12,500, so they pay tax on £7,500 (their ‘taxable income’). This means as a couple you are paying Income Tax on £7,500.

When you claim Marriage Allowance you transfer £1,250 of your Personal Allowance to your partner. Your Personal Allowance becomes £11,250 and your partner gets a ‘tax credit’ on £1,250 of their taxable income.

This means you will now pay tax on £250, but your partner will only pay tax on £6,250. As a couple you benefit, as you are only paying Income Tax on £6,500 rather than £7,500, which saves you £200 in tax.