Are you married or in a civil partnership? If so you may be entitled to a £432 tax break called the marriage tax allowance. Yet 2.7 million of the 4.2 million eligible couples are still missing out. It’s free money, so worth checking.
The marriage tax allowance is a still little-known way for couples to transfer a proportion of their personal allowance (the amount you can earn tax-free each tax year) between them. Here’s our quick Q&A on how to get it, plus some key information.Who can get it? This is the most important factor as only people with these specific circumstances will be able to apply:
- You’re married or in a civil partnership (just living together doesn’t count).
- One of you needs to be a non-taxpayer, which usually just means earning less than the £11,000 personal allowance (£10,600 for 2015/16).
- The other one of you needs to be a basic 20% rate taxpayer (couples with a higher- or additional-rate taxpayer aren’t eligible for this allowance). This means you’d normally need to earn less than £43,000 (£42,385 for 2015/16)
- Both of you must have been born on or after 6 April 1935 (if not there’s another tax perk). So you need to be YOUNGER than 82 years.
So in a nutshell one of you must be a non-taxpayer and one of you must be a basic-rate taxpayer.
What’s this about £432, haven’t you always said £212? The marriage tax allowance started on 6 April 2015, and in year 1 was worth £212. For the new tax year starting in April 2016, it’s worth £220. Plus claim it now and it’s backdated so many get last year’s AND this year’s allowance – £432.
The rest of this guide uses allowances and thresholds for the 2016/17 tax year, though as we say above you can also claim for the 2015/16 tax year, with the rates and thresholds for that year in the section above this.
Sounds promising – so how does the maths work? The partner who has an unused amount of personal allowance can transfer £1,100 of their allowance to the other (so basically 10% of the full allowance). It doesn’t matter if they have £5,000 of their allowance left unused or £500; they can only transfer £1,100.
This is how it works:
Part-time Peter works just enough and earns £5,000 at his local fish and chip shop. His full personal allowance for the year is £11,000, so he has plenty of spare allowance to transfer £1,100 to his wife.
Peter’s wife, full-time Fiona, is a software developer. She earns £35,000 and is a basic-rate taxpayer (higher-rate tax starts at £43,000 for most). Her personal allowance increases by £1,100 to £12,100 when Peter chooses to make his transfer.
So she has an extra £1,100 which she would’ve paid tax on at 20% but is now tax-free, so she’s £220 up (20% of £1,100).
OK, so how do we actually apply? It really is very simple, and only takes a few minutes; just use the application at HM Revenue & Customs (HMRC). To do it you’ll need both your National Insurance numbers, and one of a range of different acceptable forms of ID for the non-taxpayer.
If there’s a problem doing it via the web just call 0300 200 3300 and do it by phone.
It’s worth noting you can also only apply for those years in which you both meet the criteria. So if you earned more than the £10,600 personal allowance in 2015/16, HMRC won’t allow you to claim for it.
There is one very important point to make though…
If the taxpayer applies you’re doing it the wrong way round and it won’t work.
After going through the application process you’ll be immediately informed that your application has been received via email (you can apply over the phone too). If you were also eligible for the allowance in the 2015/16 tax year, you’ll have to select this option as part of the application process.
Although the onus is on you to check that you’re eligible, HMRC will write to inform you if you’re not – although you may have to wait a few weeks.
This has been copied from their blog post – because its such an easy tip and relevent for everyone up to 82 years young!
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Gayle Palmer, the creator of Great Guidelines for Later Life - The world’s most thorough, comprehensive and supportive, one-stop resource for all seniors and their families who are ready to get their lives in order before they die AND help them to live out their days having a life they love, clear in the knowledge that they have done everything they need to. She has developed various courses, programmes and workshops for seniors and their families to work through, leaving no stone un-turned.
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