TRANSFER OF PERSONAL ALLOWANCES.

 

This is a new measure introduced in the Finance Act 2014.

 

A transferable allowance is available for married couples and civil partners where neither spouse or civil partner is liable to tax at the higher or additional rate.

When does it start?

 

It starts from the tax year 2015/16

How much can be transferred?

 

A spouse or civil partner (a transferor) who meets qualifying conditions will be able to elect to transfer a fixed amount of £1,060 of their personal allowances to their spouse or civil partner (the transferee).

 

This is equivalent to 10% of the full Basic Personal Allowance for that tax year of £10,600.

How is it calculated?

Where the transferee makes a claim to the transferred allowances their income tax liability is reduced by an amount calculated in accordance with the new section 55B FA2014.

 

In simple terms

The transferors liability is calculated based on the reduced personal allowances

 

The Transferees liability is calculated based on the increased personal allowances

 

What is the maximum tax saving.

 

For 2015/156 the tax saving is up to £212 (£1,060 x 20%)

Can the election/Claim be withdrawn

 

Individuals will be able to withdraw their election or claim with effect from the tax year following the year in which they notify HM Revenue & Customs. However, both the transferor and the transferee have the option to withdraw their election or claim with effect from the tax year that their marriage or civil partnership comes to a legal end.

 

What if one partner is a higher (or additional) rate taxpayer

 

In this case no election or claim can be made.

When is it not beneficial to claim

 

If you or your spouse or civil partner were born before 6th April 1935 it could be more beneficial to claim the “married couples Allowance” instead for 2015/16

Making a claim

You can register your interest in in making such an election or claim via the HMRC website

 

https://www.gov.uk/marriage-allowance

 

HMRC should then email you to tell you when you can claim.

For information of users:
This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.