Expand transferable marriage allowance: calculation note

Central fiscal result

+£18.0bn - Net fiscal impact in 2027-28

Low case: +£8.0bn. High case: +£35.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• A 25% transferable marriage allowance is introduced.
• Central case uses UK-wide eligibility for married couples.
• No automatic benefit offset is assumed.
• Eligibility for higher-rate taxpayers is unclear.

Affected population

• Affected units are married couples and civil partners.
• One-earner couples receive the largest cash gain.
• Singles and many dual-earner couples gain nothing.
• Second earners face changed incentives.

Gross impact

• Current maximum transfer is £1,260.
• Reform wording implies a much larger transfer.
• Central cost uses £18bn before wider offsets.
• Low and high cases reflect eligibility uncertainty.

Fiscal build-up, central case

• Income-tax receipts lost: +£18.0bn
• Labour-supply reduction: +£1.0bn
• Benefit and tax-credit offsets: -£1.5bn
• Administration: +£0.5bn

Central net impact: +£18.0bn in 2027-28.

Behaviour and pass-through

• Low case assumes restricted eligibility and lower take-up.
• Central case assumes broad take-up among eligible couples.
• High case assumes higher-rate eligibility and weaker second-earner supply.
• No growth dividend is counted.

Phasing

• 2026-27: +£2.0bn. Preparation or partial implementation.
• 2027-28: +£18.0bn. Main scenario year.
• 2028-29: +£19.0bn. Behaviour and pass-through develop.
• 2029-30: +£20.0bn. Steady-state uncertainty persists.

Main source groups

• Mirrlees and review team, "Tax by Design: The Mirrlees Review" (IFS and Oxford University Press, 2011): The review favours simple tax structures and warns against reliefs that narrow the tax base; supports scepticism about expanding targeted household allowances.
• HM Revenue and Customs, "Direct effects of illustrative tax changes" (2026): HMRC ready-reckoners show large revenue effects from income-tax, NI, VAT, fuel-duty and corporation-tax changes; primary fiscal scale anchor.
• Reform UK, "Our Contract with You" (2024): The Contract specifies thresholds, duties and business-tax proposals while claiming annual cost and saving totals; defines broad current tax pledges.
• House of Commons Library, "Income tax: rates and allowances" (2026): Used to size the affected population, baseline economic quantities and sectoral exposure.
• Institute for Fiscal Studies, "Response to Reform UK policy announcements" (2025): Used to define the pledge wording, policy scope and implementation scenario being modelled.
• Kleven, Kreiner and Saez, "The Optimal Income Taxation of Couples" (Econometrica, 2009): Couple taxation affects primary and secondary earners differently, especially when second-earner participation is elastic; relevant to transferable allowances and possible second-earner disincentives.
• Reform UK, "Our Policies" (2026): Used to define the pledge wording, policy scope and implementation scenario being modelled.