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Tax year 2015-16 has seen a change which could save some basic-rate taxpayers more than £200. Below we explain how the Married Couples Transferable Allowance works. The essential idea behind the Married Couples Transferable Allowance (Marriage Allowance), introduced in the... Read more

Blog10th Aug 2015

By Sarah Munro

Tax year 2015-16 has seen a change which could save some basic-rate taxpayers more than £200. Below we explain how the Married Couples Transferable Allowance works.

The essential idea behind the Married Couples Transferable Allowance (Marriage Allowance), introduced in the 2014 Budget, is pretty straightforward. Where one spouse is a basic-rate taxpayer and the other is not using their personal allowance in full, up to £1,060 of their personal allowance can be transferred between the two. This can result in a potential tax saving of about £210.

When we look at the detail, it’s a little more complex, of course.

First of all, as you would expect, people applying for the transfer must be married couples or civil partners, who are basic-rate taxpayers or not using their personal allowance. They must be born after 1935. If not, the Married Couples Allowance would apply. Normally, they must be UK residents too.

There, are however, groups of transferors who are entitled to a personal allowance for a reason other than being a UK resident. (These include being a national of an EEA state, a resident of the Isle of Man or the Channel Islands, someone who has been employed in the service of the Crown and various other categories.) In such cases, their income must be basic rate using the hypothetical net income calculation.

How is this calculated? We assume they were UK resident for the full tax year concerned and were domiciled here in that period (worldwide income and gains included). We also assume that they weren’t deemed non-resident by a double tax treaty and that they have made any available claim for double tax relief on income and gains. If their income isn’t in sterling, it’s calculated using the average exchange rate for the year.

Getting the timing right

The couple involved in the transfer must be married for the full year or part of the tax year, as well as at the time of election. The transferor must elect for the transfer within four years of the end of the tax year concerned.

If the election is made in the tax year to which it relates, it continues for as long as the qualifying conditions are met, unless it is withdrawn or the couple divorce. If the election occurs out of the relevant tax year, on the other hand, it only affects that year and the individual must apply separately for other years.

Remember, you are only entitled to one allowance per year, even if you are married twice to separate spouses in that period! If you do have more than one spouse, you can only give the allowance to one of them.

You can register your interest by visiting https://www.gov.uk/marriage-allowance and HMRC will then invite you to apply via an email link. It’s the person who is transferring their personal allowance who must apply. You will need your NI number, as well as that of your partner, and must be able to prove your identity online. Even if you make the application during the course of the year, it will apply to the whole of 2015-16.

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