Income Tax allowance to be frozen: How couples could restore eligibility for tax relief


The Personal Allowance is due to increase from £12,500 by 0.5 percent to £12,570 next month. After this rise, the threshold will remain at the same level for five years.

While tax rates won’t rise, the amount of tax people pay would likely rise over time.

Some may wonder what this means in terms of the Marriage Allowance – a form of tax relief.

This lets an eligible person transfer 10 percent of their Personal Allowance to their husband, wife or civil partner.

In the current tax year, it would reduce their tax by up to £250 in the tax year.

To benefit as a couple, the lower earner – who would be the one to claim the allowance – must normally have an income below their Personal Allowance.

It’s possible to calculate how much tax could be saved as a couple online via the Marriage Allowance calculator.

Kay Ingram, Director of Public Policy at LEBC Group, recently spoke to Express.co.uk about the tax relief.

“From April 6 the Personal Allowance will increase to £12,570 which means that the Marriage Allowance will save up to £251.40 a year in tax for the higher earner,” she explained.

“A four-year backdated claim will also increase slightly, to up to £1,218.40.

The chartered financial planner explained the increases to tax allowances next month means more couples will become eligible for Marriage Allowance and therefore be able to benefit from a boost to their net take home pay.

However, under the five-year freeze to the tax allowances, some may find their eligibility for Marriage Allowance ceases.

“In the Budget on March 3 the Government announced that income tax allowances and bands would be frozen until 2026.

“If wage growth comes through with a recovery in the economy, some people who are now eligible for Marriage Allowance may cease to be so.

“This could arise if the lower earner’s income is above £12,750 or the higher earner’s increases beyond £50,270 (£43,430 in Scotland).

“Taxpayers who become ineligible must cancel the Marriage Allowance by contacting HMRC.”

There is a way in which couples may be able to restore eligibility, should they wish to, as Ms Ingram explained.

“Couples in this position will see the higher earner charged more tax, to cancel out the benefit of Marriage Allowance.

“However, there is a way in which those earning above the £12,570 or £50,270 (£43,430 in Scotland) thresholds can restore their eligibility by making pension savings or charitable donations under gift aid.

“Amounts saved in a pension or given to charity are deducted from income before taxable income is calculated and this can restore eligibility for those tax allowances reserved for basic rate taxpayers such as Marriage Allowance, savings allowance with £1,000 of interest being tax free and tax-free Child Benefit.”



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