In April 2015, the government introduced the ‘Marriage Tax Allowance’ allowing married couples and civil partnerships to transfer some of their tax-free allowance to their partner as long as they meet the following criteria:
- Transferring partner earns less than the personal allowance amount in the tax year (Currently £11,000).
- Receiving partner is a basic rate taxpayer (so is not paying tax in a higher bracket than basic rate).
According to HMRC statistics, over four million people are eligible but only just over a million have applied so far. It is a quick and easy process with an online form set up at www.gov.uk/marriage-allowance.
Marriage Allowance lets you transfer £1,100 of your £11,000 Personal Allowance to your husband, wife or civil partner – if they earn more than you.
This reduces their tax by up to £220 in the tax year (6 April to the following 5 April).
To benefit as a couple, you (as the lower earner) must have an income of £11,000 or less.
If you were eligible for Marriage Allowance in the 2015 to 2016 tax year, you can backdate your claim to 6 April 2015 and reduce the tax paid by up to £432.
You can get Marriage Allowance if all the following apply:
– you’re married or in a civil partnership
– you don’t earn anything or your income is under £11,000
– your partner’s income is between £11,001 and £43,000
You can still apply for Marriage Allowance if you or your partner:
– are currently receiving a pension
– live abroad – as long as you get a Personal Allowance.
If your application is successful, changes to your Personal Allowances will be backdated to the start of the tax year (6 April).
HM Revenue and Customs (HMRC) will give your partner their extra allowance either:
– by changing their tax code, usually to 1166M – this can take up to 2 months
– when they send their Self Assessment tax return, if they’re self-employed
Your own tax code will also change if you’re employed or get a pension. Your new code will reflect your new Personal Allowance and will end with ‘N’.
Your Personal Allowance will transfer automatically to your partner every year until one of you cancels it or your circumstances change – eg because of divorce or death.
If you would like more information on tax planning opportunities centred on your personal circumstances, please contact us >>