New marriage tax allowance – could you save?

Registration has opened for the new marriage tax allowance – a policy that will allow some couples to share part of their annual income tax allowance.  This allowance is available from 6th April 2015.

How does it work?  Couples that include one non-taxpayer and one basic-rate taxpayer will be able to share some of the non-taxpayer’s unused annual income tax allowance.  The individual personal allowance is  set at £10,600 from 6th April 2015.  For those who earn below this amount (once all earnings are taken into account), no income tax is paid.  The new scheme will allow up to £1,060 of the unused allowance to be transferred to their spouse or civil partner – as long as they are a basic-rate taxpayer.  The qualifying income for basic-rate tax is £10,601 to £42,385.

Who qualifies for the new allowance?  Anyone who is married or in a civil partnership (as long as the earnings rules are met). Both members of the couple must be born after 6th April 1935.  If one member was born prior to this date they can claim married couple’s allowance instead.  This tax break could benefit more than four million married couples and 15,000 in civil partnerships.

How much could I save?  Up to £212 in the first year.

Partner 1 – earns between £10,061 and £42,385 pa
Partner 2  – earns £7,500 pa
Partner 2 has an unused portion of their £10,600 tax-free allowance (£3,100).  Under the new rules, they can transfer the full allowance (£1,060) to partner 1, which will increase their tax-free allowance from £10,600 to £11,660 – making a tax saving of £212.

Even if the unused portion of your tax-free allowance is less, it can still be transferred to your partner.  If you earn £10,000, transferring the unused £600 of your tax-free allowance would still save your partner £120 in the first year.

When will I get the money?  In your pay packet. The partner who is receiving the allowance will have their tax code adjusted to reflect the larger personal allowance.

I am not married, can I claim?  Unfortunately, no.  Co-habiting couples miss out on the allowance regardless of earnings.

Need help with registering?  Contact us by phone or email and we can assist with your registration and advise on potential savings based on your own circumstances.

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