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Tax break for married couples

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26 February 2015
From April 2015 it will be possible for married couples and civil partners to transfer up to 10% of their personal allowance to their spouse.  This new allowance will be known as the ‘marriage allowance’.
 
The Government has estimated that up to 4 million couples could be eligible for this new tax break.  The marriage allowance will not be available to couples born before April 1935 as a separate Married Couples Allowance applies.
 
Tax savings of up to £212 per year could be realised and although not the same as winning the lottery, it is nevertheless a simple way to save some tax. 

What is the marriage allowance?

The marriage allowance allows spouses and civil partners to transfer £1,060 of their personal allowance to their partner in 2015/16, being 10% of their personal allowance.  The spouse making the transfer should have earnings of below the personal allowance (£10,600 for 2015/16) and the receiving spouse must not pay tax at higher than the basic rate.

In practice this will be mainly applicable to single earner households, where the non-working spouse’s personal allowance would have otherwise been wasted.  To the extent that the spouse making the transfer has earnings in excess of 90% of the personal allowance, i.e. over £9,540 for 2015/16, they will end up paying some tax if they elect in to the marriage allowance.  Although the net effect should still be a tax saving for the couple, the administrative burden may outweigh the potential savings. 

For example:

1. Fred earns £7,500 and Edna earns £25,000 in 2015/16. 

Edna will receive additional tax relief of £212 as Fred has £3,100 of unused personal allowance for the year.

2. David earns £10,000 and Julie earns £25,000 in 2015/16

David will become subject to tax as he will have a reduced personal allowance of £9,540 following the transfer against £10,000 of income i.e. £460 taxable income at the 20% basic tax rate will result in a tax liability of £92.  Julie will receive tax relief of £212 as in the first example which will give net tax relief of £120 for the couple.

How do I apply?
 
It is possible to register your interest now by filling out a short form online at the following address: https://www.gov.uk/marriage-allowance.  Following this HMRC will contact you to formally apply for the marriage allowance some time after 6 April 2015. 

If you do not register before this time you will not lose out and can apply at any time during the tax year to still benefit from the full allowance.