How to save tax of £212 in one easy lesson

News, Taxation - Personal

OK, so it doesn’t apply to everyone but if you fulfil the criteria then it is a very simple process for someone to transfer £1,060 of their unused personal allowance to their spouse or civil partner. The criteria are fairly straightforward:

  1. The relevant couple must be married or in a legally registered civil partnership.
  2. One of the couple must have unused personal allowance, ie income (excluding savings income below £5,000) of less than £10,600 in the current year.
  3. The other member of the couple must have income of between £10,601 and £42,385 in the current year, ie a basic rate taxpayer.

If the above apply then the lower earning individual can apply on-line to transfer £1,060 of their current year’s personal allowance to the other party. This can be done in about 5 minutes by going to https://www.gov.uk/marriage-allowance and following the instructions. You will need one or all of the following pieces of information available:

  • The bank account number into which child benefit, tax credits, or state pension is paid
  • The bank account number of any interest paying account
  • Details from one of your 2015 form P60

You will also need both your own and your partner’s National Insurance number.

Once the form is completed then you will receive an email confirmation that the transfer has been successful. If your partner is in employment then they will then receive a revised notice of coding and the additional tax relief will be given through their employment. If they complete a self-assessment tax return they will also receive written notification of the additional allowance available.

The first year that you can do this is the current year ending on 5th April 2016.

Whilst the online form only applies to transfers in the current tax year, this does not stop you applying after the end of the tax year, but it must then be done by completing form 575(T) which can be located at https://www.gov.uk/government/publications/income-tax-notice-of-transfer-of-surplus-income-tax-allowances-575t. This could apply, for instance, if the level of income of one or both of the individuals fluctuates and the level of income is not known until after the end of the tax year.

If applicable, please also remember to let your tax adviser know that you have completed the transfer documentation.