20th February 2015 at 4:35pm
An online registration service launched today for a new tax perk which could cut the tax bills of up to 4 million married couples, and 15,000 civil partnered couples.
As I wrote about in my guest blog for Dadbloguk, this new income tax cut of up to £212 will be of particular interest to stay-at-home parents. But it’s also relevant for all married couples and civil partners, where one of the couple doesn’t have income above the £10,600 personal allowance threshold from 6th April.
Here’s how it works.
The transferable allowance means a spouse or civil partner who doesn’t pay tax can transfer up to £1,060 of their unused personal tax-free allowance to their spouse or civil partner – as long as the recipient of the transfer doesn’t pay more than the basic rate of income tax (ie. they pay tax at 20%).
This means it’s targeted, so those on higher incomes who pay tax at 40% or 45% don’t benefit.
Retired couples may also find they qualify, if one has a lower pension income and if both were born on or after 6th April 1935. This example shows how the transfer works :
Tom and Barbara are retired. Tom’s total pension income is £30,000 while Barbara’s total pension income is £9,000. Barbara doesn’t use up her whole income tax personal allowance of £10,600, which means she doesn’t pay income tax on her pension. And because £1,600 of her allowance hasn’t been used, she can apply to transfer the maximum £1,060 personal allowance to Tom. This gives Tom a tax cut of £212. It’s likely that this would be done by a change in Tom’s PAYE code.
If you meet the criteria for this income tax allowance from 6th April, you need to actively claim it as it won’t automatically apply. You can register today – the website says it is quick to do and only takes around 3 minutes. *3 HMRC will then contact you to make arrangements.
This blog and any responses to comments are not financial advice. Tax and legislation may change in future and this blog reflects our understanding at today’s date. Standard Life is not responsible for the content on external websites.