LITRG clarify the new Marriage Allowance available from 6 April 2015 for those married or in a civil partnership where one person has an income of less than £10,600.
Introduction
On 20 February 2015, HMRC announced that people can register their interest in the new ‘marriage allowance’. From 6 April 2015, if you are married or in a civil partnership and one of you has an income of less than £10,600, you may be able to claim the new allowance. However, the adverts seem to have left people with more questions than answers. So here LITRG tries to clarify the position with some frequently asked questions about the new Marriage Allowance.
Who can claim the allowance?
Although the allowance is being advertised as the ‘Marriage Allowance’, it is open to both married couples and civil partners. It is immaterial whether the couple live together or apart. Eligibility to claim the allowance ends when the couple divorce or obtain a decree of separation, or the civil partnership is dissolved. If you are living together with someone as husband and wife or civil partners but are not actually married or in a civil partnership, then you will not be able to claim.
How does the allowance work?
Each year, individuals can earn up to a set amount each year before having to pay income tax. This ‘personal allowance’ is currently £10,000, but will rise to £10,600 from 6 April 2015.
Under the new Marriage Allowance scheme, if, in 2015/16, one of a couple has insufficient income to use their personal allowance, they will be able to transfer up to £1,060 of the unused amount to their spouse or civil partner – as long as he or she does not pay tax at a rate higher than the basic rate (see below).
If the full £1,060 allowance is used, this will increase the other person’s tax-free allowance to £11,660 – this is equal to a tax saving of £212. If only, say, £600 of the personal allowance is unused, a transfer will save £120 a year, and so on.
Who does not qualify?
Married couples and civil partners where the higher earning person pays more than the basic rate of income tax (meaning in 2015/16 they have income of more than £42,385 a year), will be excluded from the tax break.
Couples where the lower earner’s income is more than the personal allowance will also miss out because they have no unused allowances to transfer. Other couples will see no advantage from the allowance if they both have income under the current threshold.
Finally, if you or your partner were born before 6 April 1935, you may be able to claim married couple’s allowance to help reduce your tax bill instead – you cannot claim both. Normally it will be better to claim the married couple’s allowance, if that is possible.
How is the extra money paid out?
The partner who is receiving the allowance will have their Pay As You Earn (PAYE) tax code altered to reflect their larger personal allowance. This means that slightly less tax will be deducted from their employment income or pension income each pay day before they are paid the rest – around £4 a week.
If they do not have a PAYE code, because, for example, all their income comes from savings or investments, then the larger tax allowance will be reflected in their Self Assessment calculations.
What does ‘registering’ online involve?
You may have noticed that the adverts invited you to register your interest in claiming the marriage allowance at www.gov.uk/marriageallowance.
The spouse or partner with the lower income should do this by entering some details (name and email address) and then after 6 April, HMRC will be in touch to explain when and how to actually apply.
HMRC are still finalising the details of the application process, so they may not contact you until sometime after 6 April. But even if you are only able to formally apply mid-way through the tax year, you will still receive the full benefit of the allowance for 2015/16.
Furthermore, there is no disadvantage if you do not register at this stage; you will be able to make a direct application once the process is up and running and still receive the full allowance.
Can people phone or write to HMRC about the marriage allowance?
There is no way to register your interest in the marriage allowance without using the Internet. Similarly, you will only be able to apply for the marriage allowance online. On current plans you will not be able to apply by phone or post.
In addition, before being able to make the application, you will probably have to use the Government’s new ‘Verify’ system, which is also an online system, so that you can prove who you are. You will have to do this by answering some questions that only you know the answer to. You will also be asked to enter a code you receive on your mobile phone, by email, or through a call to your landline.
By the Government’s own admission, 18% of adults in the UK cannot use the Internet, so the lack of options here is quite surprising. LITRG will continue to encourage the Government to introduce a postal or telephone application service as well, to ensure that everybody who is eligible to receive the marriage allowance can actually do so.
However, in the meantime they have confirmed that they will ‘provide support to customers who need it’ and we assume this will be in the form of ‘assisted digital’ support. This means that you will be able to access a service face-to-face, by phone, or in another appropriate non-digital way, with someone either inputting your data into the digital system on your behalf, or helping you input your data into the digital service yourself.
Further information to come
LITRG expect to hear more from the Government about all aspects of the marriage allowance after 6 April, and will post any updates to their website.
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