Transferring tax allowance to your spouses

Q. I heard on the radio that there is an allowance were I can transfer some of my tax allowance to my wife. How does this work?

A. It is possible to transfer £1,100 of your personal allowance to your husband, wife or civil partner if:

*your annual income is £11,000 or less

*your partner’s income is between £11,001 and £43,000

*you were born on or after 6 April 1935

This will reduce the amount of tax your partner has to pay. It will usually save them £220 per year.

Example

You earn £8,000 a year, and your Personal Allowance for tax year 2016 to 2017 is £11,000.

You won’t pay any income tax on what you earn.

Your partner also has personal allowance of £11,000, but earns £15,000 a year.

They will usually pay 20% income tax on everything they earn over £11,000.

Transferring £1,100 of your personal allowance to them will bring their personal allowance up to £12,100 (£11,000 + £1,100).

This means they won’t pay income tax on their first £12,100 of earnings.

This will reduce their income tax liability by £220.

Your personal allowance will be reduced to £9,900 (£11,000 minus the £1,100 you transferred to your partner).

As you earn less than this, you still won’t pay any income tax.

How to apply

If you feel that you are eligible to apply for this you can complete the application online at www.gov.uk or by phoning HMRC on 0300 200 3300.

If your application is successful, changes to your Personal Allowances will be backdated to the start of the tax year (6 April).

If you were eligible for Marriage Allowance in the 2015 to 2016 tax year, you can backdate your claim to 6 April 2015 and reduce the tax paid by up to £432.

How your Personal Allowances change

HM Revenue and Customs (HMRC) will give your partner their extra allowance either:

by changing their tax code, usually to 1166M - this can take up to 2 months

when they send their Self Assessment tax return, if they’re self-employed

Your tax code will also change if you’re employed or get a pension.

Your new code will reflect your new Personal Allowance and will end with ‘N’.

When Marriage Allowance stops

Your Personal Allowance will transfer automatically to your partner every year until one of you cancels Marriage Allowance or your circumstances change, eg because of divorce or death.

If you get divorced or dissolve your civil partnership you can cancel the allowance online.

If you’re currently transferring your allowance to your partner you can choose to keep transferring it until the end of the tax year (5 April) or backdate the change to the start of the tax year (6 April).

If you ask to stop receiving your partner’s allowance, it’ll run until the end of the tax year.

If your income changes

Contact HMRC if your income changes. They’ll tell you if claiming Marriage Allowance will still benefit you as a couple or if you need to cancel your Marriage Allowance

If your partner dies

If your partner dies after you’ve transferred some of your Personal Allowance to them:

their estate will be treated as having the increased Personal Allowance

your Personal Allowance will go back to the normal amount

If your partner transferred some of their Personal Allowance to you before they died:

your Personal Allowance will remain at the higher level until the end of the tax year (5 April)

their estate will be treated as having the smaller amount

For further help get free, confidential and independent advice from your nearest Citizens Advice at www.citizensadvice.co.uk or for further information go to www.citizensadvice.org.uk/nireland