How to Transfer Tax Allowance To Spouse
- MAZ
- Jul 26
- 14 min read
The Audio Summary of the Key Points of the Article:
Understanding the Marriage Allowance and Its Benefits in 2025
So, you’re wondering how to transfer your tax allowance to your spouse and save a bit of cash? In the UK, the Marriage Allowance lets married couples or civil partners shift £1,260 of the lower earner’s Personal Allowance to the higher earner, reducing their tax bill by up to £252 in the 2025/26 tax year. It’s a nifty tax break, but it’s not for everyone. Let’s break it down with the latest rules, so you can see if it’s worth your time.
What Exactly Is the Marriage Allowance?
Now, if you’re new to this, the Marriage Allowance is a tax perk introduced in April 2015. It allows the lower-earning partner, who earns less than the Personal Allowance (£12,570 in 2025/26), to transfer 10% of their unused allowance (£1,260) to their spouse or civil partner. The catch? The higher earner must be a basic rate taxpayer, with income between £12,571 and £50,270 (or £43,662 in Scotland due to different tax bands). This transfer reduces the higher earner’s taxable income, saving them 20% of the transferred amount—£252 at most.
Be careful! You can’t pick and choose how much to transfer—it’s £1,260 or nothing. Also, this isn’t a cash payment; it’s a tax credit that lowers the higher earner’s tax bill. If they’re employed, their PAYE tax code adjusts (adding an ‘M’ for the recipient, ‘N’ for the giver), spreading the savings across their paychecks. For self-employed folks, it’s reflected in their Self Assessment.
Who Can Claim the Marriage Allowance?
None of us wants to waste time on something we don’t qualify for, right? To claim the Marriage Allowance in 2025/26, you must tick these boxes:
● You’re married or in a civil partnership (cohabiting doesn’t count).
● Both of you were born after 5 April 1935 (otherwise, check the Married Couple’s Allowance).
● The lower earner’s income is below £12,570 (ideally £11,310 or less for maximum benefit).
● The higher earner is a basic rate taxpayer (£12,571–£50,270 in England/Wales/Northern Ireland; £12,571–£43,662 in Scotland).
● You both live in the UK, or the lower earner gets a Personal Allowance if abroad.
Now consider this: If the lower earner earns between £11,310 and £12,570, transferring the allowance could make them taxable, reducing the couple’s overall savings. For example, if they earn £11,500, transferring £1,260 leaves them with a £10,310 allowance, making £1,190 taxable at 20% (£238). The higher earner saves £252, but the couple’s net gain is just £14. Always crunch the numbers first.
How Much Can You Save?
So, the question is, what’s the actual financial impact? The maximum saving is £252 per year for 2025/26, calculated as 20% of the £1,260 transferred allowance. But the real magic happens with backdating. You can claim for the past four tax years (2021/22 to 2024/25), potentially pocketing up to £1,256 if eligible each year. Here’s a table to show the savings:
Tax Year | Personal Allowance | Transferable Amount | Max Tax Saving |
2021/22 | £12,570 | £1,260 | £252 |
2022/23 | £12,570 | £1,260 | £252 |
2023/24 | £12,570 | £1,260 | £252 |
2024/25 | £12,570 | £1,260 | £252 |
2025/26 | £12,570 | £1,260 | £252 |
Source: www.gov.uk/marriage-allowance
For business owners, this can be a game-changer. If you’re self-employed and your spouse earns little, transferring their allowance could free up cash for reinvesting in your business. But beware—HMRC doesn’t adjust Self Assessment automatically; you’ll need to claim it explicitly.
Real-Life Example: Sarah and Tom’s Story
Let’s paint a picture: Sarah runs a small bakery in Manchester, pulling in £35,000 a year as a self-employed basic rate taxpayer. Her husband, Tom, is a part-time librarian earning £8,000. Sarah’s taxable income is £22,430 (£35,000 - £12,570). By transferring £1,260 of Tom’s unused Personal Allowance, Sarah’s taxable income drops to £21,170, saving her £252 (20% of £1,260). Tom’s income stays tax-free, and they’re £252 better off. They also backdate their claim to 2021/22, receiving a £1,008 cheque for the past four years. That’s extra dough for Sarah’s bakery expansion!
Why Business Owners Should Care
Now, if you’re a business owner, you’re probably juggling a million things—cash flow, VAT, payroll. The Marriage Allowance is a low-effort way to cut your tax bill, especially if your spouse earns little or nothing (maybe they help with your business informally). Unlike other tax reliefs, it’s simple to claim and doesn’t require complex accounting. However, if your income fluctuates (common for sole traders), ensure you stay within the basic rate band, or you’ll lose eligibility. Higher earners (above £50,270) get nothing from this scheme.
Be careful! If you’re a director of a limited company and pay yourself a low salary plus dividends, your “income” for tax purposes includes both. If dividends push you into the higher rate band, you’re ineligible. Always check your total taxable income before applying.
How to Apply for the Marriage Allowance and Navigate Edge Cases
Right, so you’ve got the basics of the Marriage Allowance down and you’re ready to make it work for you. Let’s get into the nitty-gritty of how to apply, what to watch out for, and how to handle tricky situations like backdating claims or changes in your circumstances. Whether you’re a busy business owner or a taxpayer looking to save a few quid, this section will guide you through the process with practical tips and insights tailored for 2025.
How Do You Apply for the Marriage Allowance?
Now, applying for the Marriage Allowance is straightforward, but it’s not automatic—HMRC won’t just hand you the savings. The lower-earning partner (the one giving up part of their Personal Allowance) must apply via www.gov.uk/apply-marriage-allowance. You’ll need a Government Gateway account, which takes about 10 minutes to set up if you don’t have one. The online form asks for basic details: your National Insurance numbers, proof of marriage or civil partnership, and income details to confirm eligibility.
Here’s a step-by-step guide to make it crystal clear:
Check Eligibility: Ensure the lower earner’s income is below £12,570 and the higher earner’s is within the basic rate band (£12,571–£50,270, or £43,662 in Scotland for 2025/26).
Gather Details: Have both National Insurance numbers and proof of marriage (e.g., marriage certificate details) ready.
Apply Online: The lower earner logs into their Government Gateway account and submits the application.
Wait for Confirmation: HMRC processes the claim, usually within a few weeks, and adjusts the higher earner’s tax code (if PAYE) or Self Assessment.
Check Your Savings: For employees, the tax code change (e.g., 1257M) spreads the £252 saving across paychecks. For self-employed, it’s reflected in your tax return.
Be careful! If the lower earner doesn’t have a Government Gateway account, they can apply by phone (0300 200 3300) or post, but online is quickest. HMRC may ask for identity verification, so keep your NI number handy.
Can You Backdate Your Claim?
So, the question is, what if you’ve been eligible for years but didn’t know? Good news—you can backdate claims for the past four tax years (2021/22 to 2024/25 in 2025/26), potentially netting £1,008 if you qualify for all years. To backdate, tick the relevant box on the online application or mention it when calling HMRC. If approved, HMRC issues a lump-sum refund to the higher earner, either as a cheque or bank transfer.
For example, take Priya and Sanjay, a couple from Leeds. Priya, a self-employed graphic designer, earns £40,000, while Sanjay, a stay-at-home dad, earns nothing. They apply in 2025 and backdate to 2021/22. Priya’s tax bill drops by £252 per year, and they receive a £1,008 refund for the past four years, which they use to fund a family holiday.
Now, here’s a tip: Backdating can trigger a tax code review, so double-check your PAYE code to avoid over- or under-taxing. For business owners, backdated savings can be a cash flow boost—perfect for covering unexpected expenses like new equipment.
What Happens If Your Circumstances Change?
Now, life’s not static, is it? Marriage Allowance claims can get tricky if your situation changes—think divorce, death, or income shifts. If you divorce or end your civil partnership, notify HMRC immediately to cancel the allowance. Otherwise, the lower earner’s tax code (e.g., 1131N) could leave them with less allowance than they’re entitled to, leading to unexpected tax bills.
If your spouse or civil partner passes away, you can still claim for the tax year of their death, provided you were eligible before they passed. For instance, if your spouse dies in October 2025, you can claim the full £252 for 2025/26. Contact HMRC’s bereavement team (0300 200 3300) to process this sensitively.
Income changes are another hurdle. If the higher earner’s income jumps above £50,270 (or £43,662 in Scotland), they lose eligibility, and you must cancel the allowance to avoid penalties. Conversely, if the lower earner starts earning above £12,570, the transfer could make them taxable, reducing your savings. Always notify HMRC of changes via your Government Gateway account.
Special Considerations for Business Owners
If you’re running your own business, you’re probably used to navigating tax complexities, but the Marriage Allowance has its own quirks. For sole traders or partners in a partnership, your income is your profit after allowable expenses. If your profits hover near the basic rate threshold, a big contract could push you into the higher rate band, voiding the allowance. Use HMRC’s www.gov.uk/check-income-tax-current-year tool to track your income.
For limited company directors, it’s trickier. Your “income” includes salary and dividends, which can quickly exceed £50,270. For example, consider Fiona, who runs a tech consultancy in Bristol. She pays herself a £12,570 salary and £30,000 in dividends, totaling £42,570—eligible for the allowance. But if she takes an extra £10,000 dividend, her income hits £52,570, making her ineligible. She applies for the allowance but monitors her dividends to stay in the basic rate band.
Here’s a table to clarify income thresholds for 2025/26:
Region | Basic Rate Band | Marriage Allowance Eligibility |
England/Wales/NI | £12,571–£50,270 | Yes, if higher earner’s income is in this range |
Scotland | £12,571–£43,662 | Yes, if higher earner’s income is in this range |
Above Threshold | >£50,270 (or £43,662) | No, higher earners ineligible |
Source: www.gov.uk/income-tax-rates
Common Pitfalls to Avoid
Be careful! The Marriage Allowance isn’t a free lunch. Here are mistakes to dodge:
● Not Checking Tax Codes: After applying, the higher earner’s tax code increases (e.g., 1383M), but errors can lead to emergency tax codes (e.g., W1/M1). Check your payslip or P60.
● Assuming It’s Automatic: You must reapply for backdated years; HMRC won’t do it for you.
● Ignoring Income Changes: A pay rise or new business income can disqualify you mid-year, so update HMRC promptly.
● Forgetting to Cancel: If you divorce or the higher earner becomes a higher-rate taxpayer, cancel the allowance to avoid tax code errors.
For business owners, another pitfall is assuming your spouse’s informal help (e.g., bookkeeping) counts as income. Unless they’re paid a salary, their income is zero, making them ideal candidates for transferring the allowance.
Key Takeaways and Advanced Strategies for Maximising the Marriage Allowance
Now, you’ve got a solid grip on what the Marriage Allowance is, how to apply for it, and how to dodge the pitfalls. But let’s take it a step further—how can you make the most of this tax break, especially if you’re a UK taxpayer or business owner juggling complex finances? This section dives into advanced strategies, real-world applications, and a concise summary of the most critical points to ensure you’re squeezing every penny of value from this scheme in 2025/26.
How Can You Optimise Your Marriage Allowance Savings?
So, the question is, how do you go beyond the basics to really maximise this allowance? For most couples, the £252 annual saving is nice but not life-changing. The real power lies in strategic planning, especially for business owners with fluctuating incomes or those who can backdate claims. Start by reviewing your joint income annually. If the lower earner’s income is creeping towards £12,570, consider reducing their taxable income—perhaps by increasing pension contributions or claiming allowable expenses if they’re self-employed.
For example, let’s look at Aisha and Raj, a couple from Birmingham. Aisha runs a freelance consultancy, earning £45,000, while Raj earns £11,000 part-time. They’re eligible for the Marriage Allowance, but Raj’s income is close to the £12,570 threshold. By contributing £1,000 to a personal pension, Raj reduces his taxable income to £10,000, ensuring the full £252 saving without making himself taxable. This move also boosts his pension pot—a win-win.
Now consider this: If you’re a business owner, you can structure your income to stay within the basic rate band. For instance, if you’re a sole trader earning £49,000, deferring a £2,000 invoice to the next tax year could keep you eligible for the allowance. It’s about timing your income smartly—consult your accountant to align this with your business goals.
What Are the Tax Code Implications?
None of us loves dealing with tax codes, but they’re crucial when using the Marriage Allowance. When you apply, HMRC adjusts both partners’ tax codes. The lower earner’s code drops (e.g., from 1257L to 1131N), reflecting their reduced Personal Allowance of £11,310. The higher earner’s code increases (e.g., to 1383M), giving them the extra £1,260 allowance. These changes happen automatically for PAYE employees, but you should check your payslip to confirm.
Be careful! Errors in tax codes can lead to under- or over-taxing. For instance, if HMRC applies an emergency tax code (e.g., 1257L W1), you could overpay tax temporarily. Use HMRC’s www.gov.uk/check-income-tax-current-year tool to verify your code. For self-employed couples, the allowance is applied through Self Assessment, so ensure your tax return reflects the transfer to avoid surprises.
How Does It Work for Complex Income Structures?
Now, if you’re a business owner with a limited company, things can get a bit fiddly. Your income often comprises a mix of salary, dividends, and sometimes rental income or investments, which complicates eligibility. Dividends are taxed after your Personal Allowance, so they can quickly push you into the higher rate band (£50,271+ in England/Wales/NI for 2025/26). To stay eligible, consider paying yourself a lower dividend and retaining profits in the company, or explore other tax-efficient options like pension contributions.
Take Oliver, who runs a small IT firm in Cardiff. He pays himself a £12,570 salary (tax-free) and £30,000 in dividends, totaling £42,570—within the basic rate band. His wife, Nia, earns £5,000 as a part-time tutor. By transferring Nia’s £1,260 allowance, Oliver saves £252. But when a big contract boosts his dividends to £40,000, his income hits £52,570, making him ineligible. Oliver consults his accountant, who suggests reinvesting the extra profit into the company, keeping his personal income below £50,270 and preserving the allowance.
Here’s a table to illustrate how income sources affect eligibility:
Income Source | Example Amount | Counts Towards Basic Rate Band? | Impact on Marriage Allowance |
Salary (PAYE) | £30,000 | Yes | Reduces available band |
Dividends | £15,000 | Yes | Can push you over £50,270 |
Self-Employed Profit | £40,000 | Yes | Reduces available band |
Pension Income | £10,000 | Yes | Can affect eligibility |
Rental Income | £5,000 | Yes | Can push you over £50,270 |
Source: www.gov.uk/income-tax-rates
What About Rare Scenarios Like Non-Domiciled Status?
Now, it shouldn’t surprise you that tax rules love throwing curveballs. If one partner is non-domiciled (living in the UK but claiming tax status elsewhere), the Marriage Allowance can still apply, but only if the lower earner gets a Personal Allowance. Non-doms often lose this allowance if they claim the remittance basis, so check with HMRC or a tax advisor. Similarly, if you’re a UK resident but your spouse lives abroad, they must be eligible for a Personal Allowance for the transfer to work—contact HMRC’s non-resident helpline for clarity.
Another rare case: couples where both partners are self-employed with fluctuating incomes. If both hover around the £12,570 mark, the allowance may not be worth it, as transferring could make the lower earner taxable. Instead, explore other reliefs, like trading allowances or expense deductions, to optimise your joint tax position.
Summary of the Most Important Points
The Marriage Allowance lets the lower earner transfer £1,260 of their Personal Allowance, saving up to £252 in 2025/26.
You must be married or in a civil partnership, with the lower earner below £12,570 and the higher earner in the basic rate band (£12,571–£50,270, or £43,662 in Scotland).
Apply online via www.gov.uk/apply-marriage-allowance, with the lower earner submitting the claim.
Backdate claims for up to four years (2021/22–2024/25) to receive up to £1,008 in refunds.
Notify HMRC if you divorce, your spouse dies, or your income changes to avoid tax code errors.
Business owners should monitor total income (salary + dividends) to stay within the basic rate band.
Check tax codes after applying to ensure correct adjustments (e.g., 1383M for the higher earner).
If the lower earner’s income is near £12,570, calculate net savings to avoid unintended tax bills.
Self-employed couples claim the allowance through Self Assessment, not PAYE.
Use pension contributions or income timing to optimise eligibility and savings.
FAQs
Q1: What is the minimum income required to be eligible for the Marriage Allowance?
A1: The lower earner must have an income below £12,570, ideally £11,310 or less, to transfer £1,260 of their Personal Allowance without becoming taxable themselves.
Q2: Can couples in a common-law relationship apply for the Marriage Allowance?
A2: No, only couples who are legally married or in a civil partnership can apply for the Marriage Allowance.
Q3: Does the Marriage Allowance apply if both partners are non-taxpayers?
A3: No, the higher earner must be a basic rate taxpayer (income between £12,571 and £50,270, or £43,662 in Scotland) for the allowance to provide any tax savings.
Q4: Can the Marriage Allowance be claimed if one partner is unemployed?
A4: Yes, if the unemployed partner has no income or earns below £12,570, they can transfer £1,260 of their Personal Allowance to their basic rate taxpayer spouse.
Q5: What happens to the Marriage Allowance if the couple moves abroad?
A5: If both partners move abroad, eligibility depends on whether the lower earner still qualifies for a Personal Allowance, which may require contacting HMRC for non-residents.
Q6: Can the Marriage Allowance be split between multiple tax years?
A6: No, the allowance is applied fully (£1,260) for each eligible tax year, but couples can backdate claims for up to four previous tax years.
Q7: Is the Marriage Allowance available for same-sex couples?
A7: Yes, same-sex couples who are married or in a civil partnership can claim the Marriage Allowance under the same eligibility rules as opposite-sex couples.
Q8: Can the Marriage Allowance be claimed if one partner is self-employed and the other is employed?
A8: Yes, as long as the lower earner’s income is below £12,570 and the higher earner is a basic rate taxpayer, regardless of employment status.
Q9: What documents are needed to prove marriage or civil partnership for the Marriage Allowance?
A9: Couples may need to provide their marriage or civil partnership certificate details, along with National Insurance numbers, during the application process.
Q10: Can the Marriage Allowance be claimed if the higher earner is close to the higher tax rate threshold?
A10: Yes, but if their income exceeds £50,270 (£43,662 in Scotland), they become ineligible, so they should monitor their income carefully.
Q11: Does the Marriage Allowance affect other tax benefits or credits?
A11: The Marriage Allowance doesn’t directly affect other benefits like Universal Credit, but reducing the lower earner’s Personal Allowance could impact their tax position.
Q12: Can couples reapply for the Marriage Allowance if they miss a tax year?
A12: Yes, couples can apply or reapply for any eligible tax year within the last four years, claiming backdated savings if they meet the criteria.
Q13: What happens if the lower earner starts earning more mid-tax year?
A13: If the lower earner’s income exceeds £12,570, the couple may need to cancel the allowance to avoid the lower earner becoming taxable, which could reduce savings.
Q14: Can the Marriage Allowance be claimed for a deceased spouse after their death?
A14: Yes, the allowance can be claimed for the tax year in which the spouse died, provided the couple was eligible before the death.
Q15: Is the Marriage Allowance available if one partner is a non-domiciled resident?
A15: Yes, if the non-domiciled partner qualifies for a Personal Allowance, but claiming the remittance basis may disqualify them, so they should check with HMRC.
Q16: Can couples cancel the Marriage Allowance if they no longer want it?
A16: Yes, the lower earner can cancel the allowance through their Government Gateway account or by contacting HMRC, especially if circumstances like divorce or income changes occur.
Q17: Does the Marriage Allowance affect the lower earner’s pension contributions?
A17: No, the allowance itself doesn’t impact pension contributions, but reducing the lower earner’s Personal Allowance could make their income taxable, affecting net income.
Q18: Can the Marriage Allowance be claimed if both partners are basic rate taxpayers?
A18: Yes, as long as the lower earner’s income is below £12,570, the higher earner’s income can be anywhere within the basic rate band for eligibility.
Q19: What happens if HMRC rejects a Marriage Allowance application?
A19: If rejected, HMRC will notify the applicant with reasons (e.g., ineligibility due to income levels), and couples can reapply after correcting issues or clarifying details.
Q20: Can the Marriage Allowance be claimed if the couple was married abroad?
A20: Yes, as long as the marriage or civil partnership is recognised under UK law and both partners meet the income eligibility criteria.
About the Author
Mr. Maz Zaheer, FCA, AFA, MAAT, MBA, is the CEO and Chief Accountant of MTA and Total Tax Accountants—two of the UK’s leading tax advisory firms. With over 14 years of hands-on experience in UK taxation, Maz is a seasoned expert in advising individuals, SMEs, and corporations on complex tax matters. A Fellow Chartered Accountant and a prolific tax writer, he is widely respected for simplifying intricate tax concepts through his popular articles. His professional insights empower UK taxpayers to navigate their financial obligations with clarity and confidence.
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