How to make money by being married
Are you married? If so, you may be eligible for a free £212. Yet according to our Money Saving Expert Martin Lewis, a staggering 90% of the four million couples who are due it have failed to claim. So what is the marriage tax allowance and how do you get it?
Last April, the government announced a new tax-break for married people (or civil partners) but it’s recently been revealed that 3.6m of the four million eligible couples haven’t actually claimed it.
Who can get it? One of you must be a non-taxpayer, ie, earning less than £10,600, and the other pays tax at the basic 20% rate, which is currently for those who earn under £42,385.
How does it work? The non-taxpayer can transfer £1,060 of their personal allowance – that’s the amount you can earn tax-free – to their partner.
Imagine Tyrone’s a non-taxpayer, he can arrange for £1,060 of his tax-free allowance to be transferred to his wife Fiz. Therefore, instead of her paying 20% tax on that amount, it’s tax-free, a gain of £212 every tax year (actually £220 from April) and once claimed you automatically get it again the next year until you tell them not to.
How do you claim it? It’s a really simple process, the non-taxpayer should just go to www.gov.uk/marriage-allowance (or call 0300 200 3300).
Any downsides? Not really no, it’s a free £212 for most. The only minor issue is if the non-taxpayer is earning just under the £10,600 threshold. This is because you have to transfer £1,060 to take advantage – nothing more, nothing less. So if you've less than £1,060 left of your allowance, you could see yourself exceeding your personal allowance. If that happens, you'd end up paying tax on the amount you've gone over. Overall though between the two of you you’re always up, by doing it.
Are there any other financial boons to being in a relationship you can make work for you? Yes, lots of little ones if you play your cards right, though with most I’m assuming you’re in a trusting relationship.
- Get a joint packaged account. These are accounts that you pay a monthly fee for but get added insurance, such as travel, mobile phone cover and breakdown cover. Provided you need that insurance (if not cancel, many have been mis-sold), they can be very worthwhile. Plus add your partner as a joint account holder even if they won’t use it, then they get the cover too at no extra cost.
Even if you don’t have packaged accounts, you can plan which bank accounts you get together, for example one of you can get one with high interest on savings and cashback on bills like Santander 123, the other could go for a free cash bonus and good service. So you get the best of both worlds.
- Help to Buy ISAs:If you’re buying a home together as long as you’re both first-time buyers you can get one each to save in every month. Then the state adds 25% to your deposit up to a maximum £3,000 – so that’s up to £6,000 for a couple; see Martin’s full ‘Help to Buy ISA’ guide.
- Inheritance tax.While not a nice thought, you can leave money to your married or civil partner (not just living together) without any inheritance tax on it and your allowance passes over to them too. Eg, you can leave £325,000 without tax on it, so if you don’t use this they get an extra £325,000 of allowance. Also if you die ISAs can be passed over and stay ISAs too.