As part of our loveMONEY election manifesto, we argue the case for scrapping the Marriage Allowance.
Later this week, the nation (or at least those who can be bothered) will go the polls to vote in the general election.
Predictably, tax has been a big subject of discussion, with Labour promising that 95% of taxpayers won’t pay more if they win, while the Conservatives are declining to rule out increases to National Insurance.
But if we were Chancellor after the election, we’d do something that none of the main parties bother to talk about - we’d ditch the Marriage Allowance in a heartbeat.
How it works
The idea of the Marriage Allowance is that it allows one partner to pass on some of their personal allowance – the amount you can earn before you have to pay tax – to the other partner.
The lower-earning partner needs to be earning less than £11,500 a year, and the higher-earning partner needs to be earning no more than £45,000 a year (or £43,000 in Scotland).
As long as you are married or in a civil partnership, you can apply to transfer as much as £1,150 of your personal allowance to your higher-earning partner each year, which translates to a tax saving of up to £230 a year.
You can apply for the allowance online, and it only takes a couple of minutes.
If you are successful, the higher-earning partner will see their tax code changed to acknowledge their increased personal allowance.
What’s more, you can backdate your claim to include any tax year since 5th April 2015, when it was introduced, meaning you could save even more.
The allowance is then transferred every year thereafter, unless you notify HMRC of a change in your circumstances.
Sounds good, right? So what’s the problem?
An abject failure
[ADVERT] The first thing to acknowledge about the Marriage Allowance is that it has been a complete failure, with the majority of people who could claim it failing to do.
The Government reckons that around 4.2 million people are eligible to take advantage of the allowance, however just 1.67 million people have done so since it launched in 2015.
With the tax break potentially saving couples up to £230 a year, the total cost of this daft allowance could be more than a whopping £960 million each year.
But, with such a poor take up, the cost is about £380 million at the moment.
There are a couple of possible reasons for this frankly rubbish uptake.
Firstly, people may simply not know about the allowance, in which case the Government hasn’t done a great job in raising awareness.
A tax break that fails to reach the people it’s aimed at is a complete waste of time.
The other possible reason is that people simply cannot be bothered.
Dealing with the tax man is no-one’s idea of fun, and it may be that the thought of messing with your tax code in order to save a few quid seems like too much work.
I have plenty of sympathy with that viewpoint too.
It’s unfair
However, our problem with the allowance isn’t down to its dreadful take up.
It’s a moral one.
The idea that the Government can put in place a financial incentive, no matter how small, which rewards people for pursuing a certain type of relationship is unfair.
Why on earth should someone who has been married for six months qualify for a tax break that isn’t open to people who have been in a relationship for decades, without ever getting married or entering a civil partnership?
It’s a nonsense.
Of all the things the Government could and should be devoting time and energy towards, incentivising the institution of marriage shouldn’t be one of them.
Even at the best of times, it’s a dreadful use of taxpayer money. But with our economy still in a shaky state, it is indefensible.
I’ll be honest; scrapping the Marriage Allowance isn’t going to make a huge difference to the UK’s financial position.
However, it will make the tax system just a little fairer.
What do you think? Should whichever party that wins the election scrap the Marriage Allowance? Vote in our poll and explain your view in the comments section below.
Read more about the loveMONEY election manifesto:
Introduce an inflation-linked savings product
Scrap the State Pension triple lock