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Transfer tax allowances to your spouse

The Finance Act 2014 has introduced limited flexibility for married couples, or couples in a civil partnership, to transfer a part of their personal allowance to their partner.

The amounts involved are not substantial and there are a number of conditions that must be met. These include:
 
  1. The spouse receiving the transferred allowance must not be a higher rate tax payer.
  2. The receiving spouse must be resident in the UK for tax purposes.
  3. The amount of the allowance that can be transferred is limited to £1,050 for 2015-16, and 10% of the personal allowance in subsequent years.
  4. Neither spouse must be eligible to claim the Married Couple’s Allowance (MCA). This only affects couples where one spouse was born before 5 April 1935.

From a tax planning point of view this will benefit couples where one partner does not earn sufficient income to utilise all of their personal tax allowance, and the other partner is paying tax at no more than the basic rate.

The existing MCA will continue to be available to elderly couples that qualify.

If you were married before 5 December 2005 and at least one spouse was born before 6 April 1935, the husband can claim Married Couple's Allowance. HM Revenue & Customs (HMRC) reduces your tax bill by 10% of the Married Couple's Allowance to which you're entitled. The actual amount depends on the husband's income.

If you married on or after 5 December 2005 or are in a civil partnership and living together and at least one spouse or partner was born before 6 April 1935, the person with the higher income can claim Married Couple's Allowance.

HMRC reduce the claimant's tax bill by 10% of the Married Couple's Allowance to which he or she is entitled. The actual amount depends on the income of the spouse or civil partner with the higher income.

If one of you dies, or if you divorce or separate, you'll still get Married Couple's Allowance for the whole of that tax year.