In this article, we explore the tax reliefs available for married couples and civil partners. There are two primary reliefs: the Married Couple's Allowance (MCA) and the Marriage Allowance (MA).
Married Couple's Allowance (MCA)
The MCA is available only if one spouse was born before 6 April 1935. For the 2024/25 tax year the MCA is £11,080. This allowance acts as a tax reducer applicable at a flat rate of 10%.
Key Features of MCA:
If eligible, taxpayers can reduce their tax liability by up to £1,108.
For marriages before 5 December 2005, the allowance is given to the husband. For later marriages or civil partnerships, it goes to the spouse with the higher total income.
MCA is restricted if the adjusted net income exceeds £37,000. In such cases the allowance is reduced by half the amount of income exceeding this threshold.
Example:Lesley, born before 6 April 1935, has a net income of £40,000 and claims MCA.
MCA Restriction: (£40,000 - £37,000) × ½ = £1,500
Adjusted MCA: £11,080 - £1,500 = £9,580
Tax Computation:
Net Income: £40,000
Personal Allowance: (£12,570)
Taxable Income: £27,430
Tax @ 20%: £5,486
Less MCA (10% of £9,580): (£958)
Tax Due: £4,528
Taxpayers born before 6 April 1935 are entitled to a minimum MCA of £4,280, ensuring a minimum tax reduction of £428, regardless of income.
MCA is time-apportioned in the year of marriage based on the number of tax months the couple were married. However, it is not apportioned in the year of death or separation.
Marriage Allowance (MA)
Marriage Allowance allows one spouse or civil partner to transfer a portion of their personal allowance to the other. This is particularly useful when one partner has unused personal allowance due to low income.
Key Features of MA:
Up to 10% of the personal allowance (£1,257 for 2024/25) can be transferred.
The transfer reduces the relinquishing spouse’s personal allowance, while the receiving spouse benefits from a tax reduction equal to 20% of the transferred amount.
MA cannot generate a tax repayment but reduces the tax liability.
Eligibility Conditions:
MA cannot be claimed if MCA is claimed. For individuals born before April 1935, only one of the reliefs can be used, with MCA typically being more beneficial.
Neither spouse must pay tax at a rate higher than the basic rate.
The election must be made within four years of the end of the relevant tax year and continues annually until withdrawn or conditions are no longer met.
Example:
David earns £40,000, and his wife Becky earns £6,000 from self-employment. Becky can transfer 10% of her personal allowance to David as her income is below the threshold.
Becky’s Revised Personal Allowance:
£12,570 - (£12,570 × 10%) = £11,313
Even with the reduction Becky’s income remains below her personal allowance so she pays no tax.
David’s Tax Computation:
Net Income: £40,000
Personal Allowance: (£12,570)
Taxable Income: £27,430
Tax @ 20%: £5,486
Less MA (10% of £12,570 × 20%): (£252)
Tax Due: £5,234
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Authored by: London Tax Team
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