QUESTION: My husband has recently left his job to focus his time on writing a book. Now that he is no longer earning a wage, am I able to make use of his tax-free allowance?
ANSWER: Since being introduced in the 2015/16 tax year, the Marriage Allowance has enabled spouses and civil partners the option to transfer part of their income tax personal allowance to their spouse or civil partner.
The personal allowance, amount of income each person can receive before their income is subject to income tax, is currently £12,570. If you earn below this limit in a tax year, there is no opportunity to carry forward the unused amount to a later tax year.
There are many circumstances in which couples find themselves in the scenario where one of them is not earning or earning very little while the other is still earning, for example maternity leave, career break, early retirement, etc.
The Marriage Allowance, often overlooked, is an opportunity to make use of the personal allowance that a spouse or civil partner is not able to make use of.
The Marriage Allowance permits up to 10% of a spouse’s or civil partner’s unused personal allowance to be transferred, which could equate to reducing your tax by up to £252 in the tax year.
While this transfer isn’t a huge amount, it can all add up if you find yourself in this scenario for a number of years. In fact, a Marriage Allowance claim can be made for the previous four years if the conditions are also met in those earlier years.
The main conditions that you must satisfy to make a Marriage Allowance claim are that you are not a higher rate taxpayer, you are both resident in the UK and neither you or your partner makes a claim for the Married Couples Allowance (MCA). The MCA is a separate tax reducer that is only applicable if one of the spouses/civil partners were born before April 6 1935.
The quickest way to apply for Marriage Allowance is online via your Government Gateway, but you can also make a claim through your self-assessment tax return if you already prepare one, or alternatively by completing a Marriage Allowance form and posting it to HMRC.
You will know HMRC have actioned the claim by issuing each of you a new PAYE tax code. The recipients code changes to ‘M’ and the partner who transferred part of the allowance will see their code change to ‘N’ (this is dependent on them being in employment or receiving a pension). Once the claim is made, it will be automatic for each tax year going forward so you will need to notify HMRC on a change of circumstances and you are no longer eligible.
- Feargal McCormack (feargal.mccormack@aabgroup.com) is managing partner at AAB Group Accountants Limited (www.aabgroup.com). The advice in this column is specific to the facts surrounding the question posed. Neither the Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.
