The Personal Allowance is how much you can earn before you start paying tax – so it’s important you make the most efficient use of it!
The standard personal allowance is £10,600 for the current tax year and not everyone will be able to make full use of this. If you and your spouse are in the situation where one of you earns above the personal allowance and one just below you can make use of transferring the Marriage Allowance.
Marriage Allowance lets you transfer £1,060 of your Personal Allowance to your husband, wife or civil partner. Adding £1,060 to your partner’s Personal Allowance means they’ll pay £212 less tax in the tax year (which runs from April 6th to April 5th the following year).
You can get Marriage Allowance if both of you meet the following requirements:- your partner’s income is between £10,601 and £42,385; and you and your partner were born on or after 6 April 1935.
By claiming Marriage Allowance, your partner’s Personal Allowance increases to £11,660 and they’ll pay £212 less tax and your Personal Allowance goes down to £9,540 so you won’t pay any tax if your income is less than this.
You can apply online for Marriage Allowance and this takes effect from the start of the next tax year. HM Revenue and Customs will give your partner their extra allowance either by changing the tax code, or if you you’re self-employed, on your Self-Assessment tax return. Your tax code will also change if you’re employed or get a pension. This can take 2 months to take place once applied for.
Once you have transferred your Personal Allowance this will transfer automatically to your partner every year until one of you cancels the transfer. If you cancel the transfer by contacting HMRC your partner will receive it for the current year and then from the beginning of the next year the transfer will stop. If your partner rings up to cancel the transfer and no longer wants to receive the allowance transfer this will be backdated to the start of the current tax year.
This is a useful tool to help reduce your tax if you or your spouse do not use the full allowance. The online application requires both your national insurance details and P60 details for the last year.
As always, don’t hesitate to get in touch if you have any questions – we’re happy to help!