Low take up of the marriage allowance highlights policy flaws

03 February 2016

Jackie Hall

According to reports in the weekend press, fewer than one in ten eligible couples have applied for a new marriage tax break which came into effect on 6 April 2015.

The new relief is designed to benefit low earning couples where one spouse has insufficient income to use their personal allowance. Where couples meet the conditions the spouse with the unused allowance is able to transfer up to £1,060 of the unused allowance to their spouse by applying online. 

The tax break – available to both married couples and civil partners - is worth up to £212 in the current tax year. However, many low income couples won’t be able to take advantage. 

For example if one spouse has no income but the other has just above the higher rate threshold no transfer is available. Similarly where both spouses have income just above the personal allowance there is no unused allowance to transfer. In both cases they may have joint income lower than some eligible couples

So what’s stopping people from claiming? 

There are suggestions that people simply don’t know that this relief exists. Many eligible couples will not be represented by accountants, so there is a job for the government in terms of raising awareness.

Secondly, despite claims from government ministers that it is quick and easy to register, couples may be put off by the prospect of having to jump through several administrative hoops. Perhaps for some older couples, it may be the case that the switching to digital and having to claim this online is providing yet another stumbling block. 

There have also been criticisms that the policy is an unwelcome reverse of the principle of independent taxation. For couples to make a successful claim, they will need details of their partner’s income – adding complexity for what is quite a modest return.

It may be that the level of take-up will increase over time. Next year, the potential savings will rise to £220. Couples will also have the opportunity to claim back the relief for up to four years, so many may decide that it’s worth the effort when between £800-£1000 is on offer. 

If you would like to discuss any of the points raised here further, please contact Jackie Hall or your usual RSM contact.