Millions of unmarried couples could benefit from a £250 tax break this year thanks to a change in the law, the Government has announced.
All couples in England and Wales will now be able to apply for a Civil Partnership by the end of 2019, giving them greater financial security.
A legal agreement
Couples who live together will now be able to get a civil partnership after the Supreme Court ruled that a ban on it was in breach of the European Convention on Human Rights.
The move, which was first announced last year under plans to equalise the law, is an extension of the Civil Partnerships Act 2004, which gave people in same-sex relationships legal recognition.
However, it excluded heterosexual couples who live together from equal rights on savings, tax and pension benefits, compared to those who are married.
Under the new rules, cohabiting couples who opt not to marry will be given the option to tie the knot in a simple, paper agreement instead.
Marriage tax allowance
The rule change, which will be enforced by the end of this year, will enable the 3.3 million UK couples who live together to share financial responsibilities.
It will also grant couples who enter into a civil partnership access to a £250 marriage tax allowance that is currently denied to them.
The system permits couples to transfer £1,250 of their personal allowance – the amount that can be earned tax-free each year – between them, helping to reduce the cost of their yearly tax bill. If the lower income earner passes a portion of their personal allowance to the higher earner, this will reduce their tax bill by £250 per year.
But couples who live together and choose not to take out a civil partnership will not be entitled to claim the tax break.
Who can claim marriage tax allowance?
To claim marriage tax allowance, couples need to meet the following criteria:
- You are married or in a civil partnership
- You do not pay income tax, or your income is below your personal allowance (normally £12,500)
- Your partner pays income tax at the basic rate, which usually means their income is between £12,501 and £50,000
More information on marriage tax allowance is outlined on the government website