The New Marriage Allowance
According to reports, many couples have yet to make the claim to transfer any surplus personal allowance to their basic rate spouse. It is not clear why this is but there seems to be a lack of awareness about the new marriage allowance and, an uncertainty as to how the claim should be made, together with misleading guidance from HMRC.
The potential beneficiaries of this allowance are likely to be pensioners or families with young children where one spouse does not work or only has a small pension. The tax saving amounts to £212 in the 2015/16 tax year and £220 in 2016/17. The allowance works by transferring up to 10% of an individual’s personal allowance to their spouse, thereby utilising any unused personal allowance of one spouse and increasing the tax-free income of the other. In order to make a claim the following conditions must be satisfied:
Conditions to be satisfied to claim the new marriage allowance
- The claimants must be married or in a civil partnership.
- Both individuals must not be higher or additional rate taxpayers.
- The claimants must not have claimed married couples’ allowance.
- The individual with the lower income, i.e. the ‘transferring spouse’, must elect for a reduced personal allowance
- The recipient of the increased allowance must not be using the remittance basis.
- The recipient of the increased allowance must be resident in the UK, Isle of Man or the Channel Islands, or a national of an EEA state.
Provided the above conditions are met, a claim can be made by the transferring spouse, either online, or via their tax return. Claims can also be made by telephone for those individuals who do not have access to the internet. HMRC will require both national insurance numbers as well as an acceptable form of ID for the transferring spouse.
The allowance can also be transferred between two basic rate taxpaying spouses, for example, where one receives dividend income taxed at 7.5% and the other receives rental, interest or employment income, which is taxed at 20%. Here, the saving reduces to £138, but may still be worth considering.
Provided the above conditions were also met in the previous tax year, you will also be able to backdate your claim to 2015/16. The claim could; therefore, be worth a total of £432 for both tax years and is really very simple to do. Apply now to avoid missing out! Alternatively, if you are unsure whether this would benefit you or would like any help making the claim, please contact us.