This week saw the personal income tax allowance rise to £10,600. This means that any income earned up to this amount is tax free.
In the 2014 Budget, the Government announced that there would also be a transferable allowance, and this was confirmed in this year’s Budget. From this week, if you are married, it will be possible for one spouse to transfer up to £1,060 of their personal tax allowance to the other spouse.
Not every married couple will be able to take advantage of this new tax break. If one of the couple is a higher rate or additional rate taxpayer, then the allowance cannot be transferred. In other words, the recipient must earn between £10,600 and £42,385 for a transfer of the allowance to take place.
Both spouses must also be born after 6th April 1935, as couples born before this date will benefit from the existing married couples tax allowance.
It is estimated that over 4 million couples will benefit from this new tax break, which will save up to £212 in tax each year.
The transferable allowance will rise in future tax years and will be set at 10 per cent of the full personal allowance.
The allowance will not be transferred automatically and couples must remember to claim the tax break otherwise it will be lost. The claim can be made at any time in the tax year and the full benefit of the allowance will be received.
Interest in claiming the allowance can be registered online at www.gov.uk/marriage-allowance and an email will be sent by HMRC later in the year explaining what is required to make the claim.
David Hill is a Chartered Financial Planner and Independent Financial Adviser at Hills Financial Planning, 15 Agnew Street, Larne. He can be contacted on 028 28276814 or by email: firstname.lastname@example.org