New transferable tax allowance
From 6 April 2015 married couples and civil partners may be eligible for a new tax break.
The new transferable tax allowance means spouses and civil partners can transfer up to 10% of their personal tax-free allowance to the other partner, which means £1,060 for the 2015/16 tax year.
It is available to couples where neither pays tax at the higher or additional rate.
It will mean that the higher earner will be able to earn £1,060 more before they start paying income tax. This will benefit couples where one is a basic rate taxpayer (earns below £41,785 in 2015/16) and one has unused personal allowance.
For those couples where one person does not use all of their personal allowance the benefit represents a saving of up to £212 for the tax year.
This also applies where a higher earner is self-employed.
The option to transfer is not available to unmarried couples.
So, who is eligible?
You’ll be able to claim Marriage Allowance if all the following apply:
• you’re married or in a civil partnership
• you have an annual income of less than £10,600 – including pensions, savings and investments
• your spouse or civil partner has an annual income of between £10,601 and £42,385
• you were both born on or after 6 April 1935
How do I apply?
For most tax payers, the application for the new Marriage Allowance must be made online, visit www.gov.uk/marriage allowance
HMRC will tell the recipient about the change to their Pay As You Earn (PAYE) tax code.
You can register at any point during the tax year and will still receive the full benefit of the allowance. The spouse or partner with the lower income registers their interest in transferring some of their personal allowance by entering some basic details. HMRC will subsequently invite the couple to apply. People who don’t register their interest will be able to make an application at a later date and still receive the allowance.
What happens next?
Once the application has been made the transferor’s tax free personal allowance will be reduced by £1,060. The spouse or civil partner receiving the transferred amount will have their tax free personal allowance increased by £1,060.
Couples will be entitled to the full benefit in their first year of marriage.
Born before 6 April 1935?
If you or your partner were born before 6 April 1935, you may be able to claim Married Couple’s Allowance instead to reduce your tax bill by up to £816.50 a year.
For further advice or information on this or any tax queries you may have, please do not hesitate to contact a member of our tax team on:
01633 815800 or email Natalie.Vvind@hsj.uk.com