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February 23, 2017

Married Tax Allowance

Did you know you can share your tax free allowance and transfer a proportion with your husband or wife?
In this current financial year 2016/17 an individual can earn up to £11,000 before paying tax.
If you earn less than this in this financial year you can transfer £1100 (10% of your allowance) to your husband or wife, taking on some of their income, hence reducing their overall income by the same amount and reducing their tax bill.
You can get Marriage Allowance if all the following apply:

  • you’re married or in a civil partnership
  • you don’t earn anything or your income is under £11,000 for 2016/17
  • The higher earner’s income is between £11,001 and £43,000.  Their overall income needs to be in the lower tax bracket, couples where one member is in the higher bracket eligible.
  • Both of you must have been born on or after 6 April 1935

So how does it save money?

For example…A wife works part time and earns £6000, her personal allowance for the year is £11,000, so she has a  spare £5000.  She transfers £1100 to her husband.
Her husband earns  £30,000 which makes him a basic-rate taxpayer (under the £43,000 threshold).  Once the allowance is transferred husband can now claim £12,100 of his overall income tax free instead of the initial £11,000 (11,000 + £1100 transferred).
This makes the husband £220 better off as he would have paid 20% tax on that £1100 which is now tax free!

In the majority of cases the amendment is made to tax code of the higher earner or for the self employed the allowance will be increased as part of their self assessment tax return.


How to apply
The non tax payer needs to apply to take on the additional income from their husband/wife, not the tax payer.
You can find out more and apply here

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