Married with children? Here’s a tax break you could be eligible for

As a contractor, managing your expenses appropriately, and in line with the latest legislation is key to making contract work as profitable as possible. There are a number of tax breaks available to the self-employed, many of which are left unclaimed by contractors looking to keep the management of finances as simple and straightforward as possible. The Marriage Allowance is one such tax break being underutilised by many. In this post, we explore the Marriage Allowance and discuss who may be eligible to apply for it.

What is the Marriage Allowance?

Contractor UK provides a simplified definition of exactly what Marriage Allowance is:

“If your spouse isn’t taking full advantage of their personal allowance, but you are unable to take them on as a part-time employee for whatever reason, this allowance will enable them to share a portion of their personal allowance with you. The Marriage Allowance is a new tax break for married couples and civil partners that was introduced in April 2015. It allows the lower earning spouse to transfer a portion of their personal allowance to their partner, in order to reduce the higher earner’s tax liability.”

Thanks to the Marriage Allowance, couples can reduce their tax bills significantly, saving up to £230 per tax year in some cases. The lower earner within the couple must have an income of £11,500 or less to qualify.

Who is eligible to claim?

You are eligible to claim if you’re married or in a civil partnership and the lower earner doesn’t earn anything or does earn less than £11,500. Your partner’s income must also be between £11,501 and £45,000 per annum. Higher rate (those earning more than £45,000 per tax year) and additional rate (with annual incomes of over £150,000) tax payers do not qualify for the Marriage Allowance. The Marriage Allowance can also be claimed if you or your partner are currently in receipt of a pension or live abroad.

Eligible but haven’t claimed Marriage Allowance to date? Don’t worry, you can backdate your claim for any qualifying tax year since 5th April 2015.

Isn’t this the same as Married Couple’s Allowance?

Despite the similar names, Married Couple’s Allowance is a different tax break altogether. Although it is similar to the Marriage Allowance in that it helps you reduce your tax bill, it comes with higher barriers to entry. Namely, you have to be married or in a civil partnership, living together, and you or your partner needs to have been born before 6th April 1935. Few contractors are likely to still be working in their 80s.

How can I apply for Marriage Allowance?

You can apply for Marriage Allowance online here, with the application able to be used for current and backdated claims. However, you should inform HM Revenue & Customs (HMRC) if your circumstances change (i.e. if you divorce or dissolve your civil partnership) and you want to cancel your Marriage Allowance.

Need further advice on managing your contractor finances? Browse our payroll processing products today or contact our team directly to discuss your requirements.

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