Tax in retirement Married couple's allowance
If you are married or in a civil partnership and one of you was born before 6 April 1935, you may be entitled to married couple's allowance (MCA), part of which is means-tested.
Married couple's allowance won't increase the amount of income you can receive before you pay tax. Instead, as a 'restricted' allowance, it reduces your tax bill by 10% of the allowance you're entitled to.
- If you receive the minimum allowance of £3,220 in the 2016-17 tax year, your tax bill would be reduced by £322.
- The same minimum, and corresponding reduction, applies in the 2015-16 tax year.
How the married couple's allowance works
Married couple's allowance only applies if one or both of the couple were born before 6 April 1935.
- For the 2016-17 tax year, married couple's allowance is £8,355
- For the 2015-16 tax year, married couple's allowance was also £8,165.
However, if your income is above a certain limit, married couple's allowance is reduced by £1 for every £2 of additional income.
Lower and upper income limits for married couple's allowance
The table below shows the lower and upper earning limits between which you receive some married couple's allowance.
If your income falls below the lower limit, then you'll receive the full married couple's allowance. If your income falls between the lower and upper limit, you will receive some married couple's allowance, but not the full amount.
If your income is above the upper limit shown you'll only receive the minimum married couple's allowance.
The recipient of married couple's allowance is normally the husband. However, if you married or became civil partners on or after 5 December 2005, the allowance is given to the partner with the higher income (and is also reduced by reference to their income).
|Upper and lower limits for higher age-related married couple’s allowance|
|Age of recipient||Age of spouse or civil partner||Lower limit 2015-2016||Upper limit 2015-2016||Lower limit 2016-2017||Upper limit 2016-2017|
|Under 66||Under 81||n/a||n/a||n/a||n/a|
|Under 66||81 or over||27,700||£37,970||27,700||£37,970|
|66 to 79||Under 81||n/a||n/a||n/a||n/a|
|66 to 79||81 or over||£27,700||£37,970||£27,700||£37,970|
|81 or over||Any age||£27,820||£38,090||£27,700||£37,970|
If your tax bill is too low to use up all of your married couple's allowance, you can transfer the unused amount to your partner.
To transfer married couple's allowance, tick the relevant box on your tax return after the end of the tax year, or contact your tax office if you don't normally complete a return.
Although they don't qualify for MCA, married couples born after 1935 are able to transfer £1,100 of unused personal allowance (Marriage transferable tax allowance) in 2016. For 2015-16 the figure was £1,060.
If you're set to earn less your personal tax allowance in 2016/17 (£11,000), you can transfer unused allowance to your partner so they have less income tax to pay, provided they are a basic-rate taxpayer. If those earning less than £9,900 (£11,000-£1100) transfer £1,100 allowance to their partner, they will save them £220. Those earning above £9,900, but below £11,000 can still transfer £1,100 of allowance, but will become liable to pay tax on any income in excess of £9,900. Their partner still makes a tax saving of £220 but the extra tax they pay reduces the overall level of saving made by the couple.
Maintenance relief and married couple's allowance
Married couples and civil partners can claim maintenance allowance, which acts to reduce your tax bill if you're making maintenance payments to your ex-partner.
To be eligible for this, you or your ex-partner must have been born before 6 April 1935 and the maintenance payments you make must be under a legally binding agreement.
Your tax bill will be reduced by the lower of:
- 10% of £3,220 for the 2016-17 tax year (the same as 2015-16) or
- 10% of the amount you've actually paid.
- Tax rates and allowances- check key figures for 2015-16 and 2016-17
- Which? tax calculator- check your 2015-16 tax bill with our tax calculator
- Which? Money Helpline -our experts answer your tax queries
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