Most of us of have heard about this new ‘Marriage Allowance’ Tax break. David Cameron has used the policy to tell us how much he ‘believes in marriage’. Let’s be honest, we don’t really care if he believes in marriage or not, we just want to know what we’re going to get out of it, right? I’ll let you in on a secret, it could be very good for you. The tax break could cut the cost of your wedding considerably.
Let’s start at the beginning; what is this tax break, and what do you get? Well, it’s the 'Marriage Allowance', its available from the 4th of August and it allows one of you to transfer £1,060 of your tax-free allowance to your partner. You have to earn under the tax-free allowance of £10,600 and your partner has to earn under £42,385. It goes without saying that you have to be married or in a civil partnership. It also takes into account your savings, pensions and investments so you can't claim it if you’re just sitting on a big pile of cash. Which is probably fair enough.
Okay, so, you think you fit the bill? How do you apply?
First of all, you have to register your interest in the 'Marriage Allowance', (here https://www.gov.uk/marriage-allowance) then the HRMC will invite you to apply, and finally they'll tell you whether you're eligible. Maybe that's a bit of a lengthy process, but it could be worth it.
How much is it really worth in cold hard cash?
If ‘Earner 1’ takes home £9,000 a year, and ‘Earner 2’ earns £41,000, ‘Earner 1’ can transfer the maximum £1,060 because there is £1,600 of the their personal allowance left. So, that’s £9,000 tax free for ‘Earner 1’ and the maximum of 11,660 tax-free for ‘Earner 2’; a saving of £212 a year. However, if ‘Earner 1’ is on £10,000 and ‘Earner 2’ still earns £41,000 ‘Earner 1’ can only transfer the remaining £600 of their allowance to ‘Earner 2’ which would mean 11,200 tax free; a tax break of £120 a year.
With me so far?
This next bit isn’t that hard to understand but it isn’t entirely logical. If you earn £5,000 a year you can still only transfer the maximum of £1,060. Which means the maximum you can save a year is £212. That works out at £5,000 tax-free for 'Earner 1' and 11,660 tax-free for 'Earner 2' totaling… £16,660 tax-free earnings. But surely your combined allowance should be 10,600 plus another 10,600; £21,200, the total of two individual allowances. But then again to expect such a logical idea from politicians might be asking a bit much!
It doesn’t compare that well to the 'Married Couples Allowance' which is a different (but very similar) kind of tax break. If you were born before 1935 you can claim 'Married Couples Allowance' and you can save up to £815 a year on your tax bill.
That’s not to say this tax break isn’t worth anything. On average, a wedding can cost £12,000 or even more these days but the savings you can make with this tax break can go towards reducing that sum. If you save the maximum amount over 30 years of marriage you can half the cost of your wedding by saving over £6,000 on tax. Let’s hope your marriage gets to 60 years and you’ll have paid off the whole thing. Okay, so you’re playing the long game, but that’s what marriage is about. If you’re worried about how much a wedding would cost you, see if you’d be eligible for the tax break and that might give you the push you need to just go for it! Also, keep reading this blog because I will be hitting you with a barrage of money saving tips only available to those who’ve said their vows!