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During the phone-in during the Ask Martin Lewis segment of The Emma Barnett Show, the financial journalist spoke about the Marriage Allowance. Last week, one caller – named John – asked the Money Saving Expert whether it would be worth him claiming this form of tax relief – and today, Martin had more to share.
John, who receives several different benefits including Employment Support Allowance (ESA), Personal Independence Payment (PIP) as well as Disability Living Allowance (DLA).
First-up, Martin gave listeners a brief explanation as to what the Marriage Allowance is.
He explained that “if you are a basic 20 percent rate taxpayer and you are married or in a civil partnership with a non-taxpayer – someone who doesn’t pay income tax – so that would generally be income of less than £12,500 a year,” then the non-taxpayer can shift 10 percent of their tax-free allowance to their spouse or civil partner.
However, it’s very important to be aware that couples cohabiting or in a common law partnership are not eligible.
This year, that 10 percent would mean the non-taxpayer could shift £1,250 of their tax-free allowance to the taxpayer.
“So that’s now £1,250 that the taxpayer would have paid 20 percent tax on, now doesn’t,” Martin said.
“So a gain of £250 this year and you can backdate it for four years.”
As such, it may be that some people could end up being eligible for a substantial payout.
He continued: “So the total gain if you’re eligible for all that time is over £1,000.”
Martin then turned to John’s particular situation, and broke down which forms of income were taxable and which weren’t.
Due to PIP and DLA not being taxable, Martin worked out that John doesn’t need to pay income tax, and hence it may be he’s able to claim the Marriage Allowance.
While John’s different forms of taxable and non-taxable income made the situation seem more complicated, the financial journalist suggested it may be an easier process for those in other situations.
“And anybody else listening, if you’ve got more simple scenarios, the easiest way to work it out is do you pay tax?
“If tax is taken off your income, you’re a taxpayer,” he said.
“If it’s not taken off your income, you’re a non-taxpayer.
“If you’re a non-taxpayer married to someone whose highest rate of income tax is 20 percent you can shift this across.
“There’s still nearly a million people in the country eligible for this who aren’t doing it.
“It’s an absolute no-brainer.
“The only minor time it can not work out is if you’re only a tiny bit below the income tax allowance and your partner is only a tiny bit above the income tax allowance, then in a hypothetical situation – because I’ve never really heard it happening – it may not be worth doing for you.
“For the vast majority of people it’s a no-brainer and the fact you can backdate it means you’re talking over a grand for some so it’s worth looking at if that’s ringing a bell with you.”
The Emma Barnett Show airs weekdays on BBC Radio 5Live from 10am.
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