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Saving tax when married

By Ensors Team
28th Jun 2019

If you haven’t already, now is the time to check to see if you can benefit from the Transferable Married Allowance (TMA).

As you can only make an election for the TMA to apply up to four years after the end of the tax year to which it relates, the current 2019/20 tax year is the last time that you will be able to backdate any claim needed to 2015/16 when this allowance was introduced.

So what is the Transferable Married Allowance?

The TMA is the ability for one spouse to transfer 10% of their personal allowance (PA) to the other.  In its simplest form, it allows a couple to save income tax where one of them may not have fully utilised their personal allowance – perhaps because they only work part time on low income.  Although it was originally intended to be restricted to those who have unused personal allowances, it is available for anyone who is a basic rate taxpayer to transfer 10% of their PA to their spouse.  This is particularly useful where other allowances can be used such as the dividend or savings allowances, have foreign tax credit available or have restricted finance reliefs available from let residential property income.  

To qualify, the following must apply:

  • Both of you must have been born on or after 6 April 1935; 
  • You must be married or in civil partnership for the whole or part of the year;
  • Neither of you should pay income tax at rates above the basic rate of tax (remember you can extend your basic rate band with Gift Aid donations or pension contributions)
  • The allowance must be gifted from the donor – it cannot be claimed solely by the recipient

How much is it worth?

The TMA relief is limited to the basic rate tax of 20% of the amount of allowance transferred (Scottish taxpayers have their own rates).  As the actual savings are also applicable to your personal circumstances, the amount saved will vary from person to person, but the maximum savings are: 2015/16 £212; 2016/17 £220; 2017/18 £230; 2018/19 £238 and £250 for the current 2019/20 tax year, which may lead to a healthy refund if you qualify but have not claimed before.  Remember that after the end of this tax year, you will only be able to backdate a claim to 2016/17.  (Usually, if both spouses pay income tax at 20% and their affairs are straightforward, there is often no benefit and therefore no need to claim) 

Where do I claim?

There are several ways to apply to gift the Transferable Married Allowance to your spouse.  You can apply through your Personal Tax Account (if you have set one up with HMRC), apply online, through your Self-Assessment Tax Return (should you file one) or by calling HMRC direct.  If your spouse as recipient is under PAYE, they will receive an additional allowance in their PAYE code, or if under Self-Assessment, as a credit to their Self-Assessment Account.

Once a claim has been made, it will remain in force until either withdrawn by the donor, either the donor or recipient cease to qualify (most commonly if they stray into the 40% tax bracket) or if the marriage or civil partnership comes to an end.  Non-residency and death can also cause issues although executors / personal representatives can also make claims on behalf of the deceased.  If you find you have stopped qualifying for some reason, you can reapply once you re-qualify.  Alternatively, you could merely wait until after each tax year has ended and decide then whether or not it is possible to make a solitary retrospective election each year in isolation.

Whilst not a major tax saving, this relief is gradually improving as the Personal Allowances increase and if you have not claimed before, there may be a nice income tax refund that could be claimed.  Just don’t leave it too late as after April 2020 you will not be able to claim the TMA for 2015/16.