If you are married or in a civil partnership, you may be able to benefit from the new tax break for married couples announced last week – a transferable tax allowance for married couples.
This new tax break will come into effect from April 2015 and will allow one individual to transfer a fixed amount of their personal allowance to their spouse or civil partner. The transferable tax allowance will only be available to couples where neither of the partners is a higher rate taxpayer.
How does the transferable tax allowance work?
Assuming you meet the criteria for the transferable tax allowance, one individual can transfer up to £1,000 of their income tax personal allowance to the other. This will mean that the higher earner will be able to earn £1,000 more before they need to start paying income tax. This will result in a maximum tax saving of £200 a year for a qualifying couple.
The new tax break will be available to married couples, same sex married couples and civil partners. Couples will be entitled to the full benefit in their first year of marriage.
The new tax break will be available from April 2015 and aims to benefit middle and lower income couples to reduce the tax bills for stay-at-home and part-time working spouses.
To be eligible for the new tax break, you will need to meet certain criteria, namely:
• One partner needs to be a basic rate taxpayer (earning below £42’285 in 2015 to 2016).
• One partner needs to have a portion of their personal allowance unused.
• Individuals must be married or part of a civil partnership to transfer their personal tax allowance.
• All claims need to be made online.
• The new tax break will not be available if either or both individuals is a higher rate taxpayer.
• Any older people who are currently entitled to the married couple’s allowance will not be eligible for the transferable tax allowance option.
The finer details of how this will work in practise are yet to be revealed and we look forward to sharing these details as and when they become available.
If you think you may be eligible for this new tax break or would like any further details on tax savings, please contact us on 020 8780 2349.
We would be happy to meet with you to understand your circumstances and how we can maximise your tax savings available.
This blog is a general summary. It should not replace professional advice tailored to your specific circumstances.