From 6 April 2015 an individual can elect to transfer 10% of their personal allowance (£1,100 for 2016/17) to their spouse or civil partner. The legislation calls this the ‘transferable tax allowance’ but it is more commonly referred to as the ‘marriage allowance’.
The transferee’s personal allowance is reduced by the amount ‘transferred’
In order to claim the marriage allowance you must:
- be entitled to a personal allowance
- you don’t earn anything or your income is under £11,000
- your partner’s income is between £11,001 and £43,000For transferees who are employed the relief is given by increasing the personal allowance in the PAYE code and adding the suffix ‘M’ (eg 1210M for 2016/17
- For transferees who are self-employed, tax relief is given via a tax reduction of 20% of the transferred amount (ie £1,100 x 20% for 2016/17), in the income tax computation.
The election to ‘transfer’ 10% of the personal allowance is made by the transferor and must be made within four years of the end of the relevant tax year.
Once made, the election remains in force until it is withdrawn, although the transferee cannot benefit from the tax reduction or the marriage or civil partnership comes to an end by divorce
The transferor can make the election using the online form on the Gov.uk website.