TT211: Transferable personal allowances for married couples and civil partners

New rules from 6 April 2015

THE MEASURE

This measure will allow a spouse or civil partner who is not liable to income tax above the basic rate to transfer up to £1,050 of their personal allowance to their spouse/civil partner, provided that the recipient of the transfer is not liable to income tax above the basic rate. The transferred personal allowance will act as a tax reducer for the recipient with a reduction in income tax of £210 and an increase in disposable income of £1,050!

HOW DOES IT WORK?

All individuals have a personal allowance for tax purposes. This is the amount of money an individual can earn in a year before they must pay tax. It is currently £10,000 and will rise to £10,500 from 6 April 2015.

Married couples and civil partners where one person earns less than the personal allowance will be allowed to transfer up to £1,050 of their unused allowance to their partner, reducing their tax bill.

For example, if one person earns £5,000 and their partner earns £20,000, the lower earner can transfer £1,050 of their unused allowance to the higher earner. The higher earner can take home an additional £1,050 tax-free, so thanks to this relief they will pay £210 less tax over the year.

WHEN?

This measure will come into effect from 6 April 2015.

WHO WILL BE AFFECTED?

This will be available to couples provided that either spouse or civil partner is not a higher or additional rate taxpayer. Additionally, it will not be available to non-UK domiciled individuals who elect to pay tax on the remittance basis of taxation or non-UK residents who would be higher or additional rate taxpayers if their worldwide income was within the scope of UK tax.

Married couples or civil partnerships who are eligible to claim the Married Couples Allowance (MCA) i.e. at least one of the spouses, or civil partners, was born before 6 April 1935, will not be able to make a transfer.

Those with spouses and partners should ensure they are making the most of both allowances and the tax reliefs available to them. If you are unsure whether this relief would be available to you, please speak to one of our tax partners.

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