Marriage Transfer Allowance

This week’s hot topic all seems to be about the marriage transfer allowance.

What is the Marriage Transfer Allowance?

What this is, is if you have a husband and wife, husband and husband, wife and wife, Civil Partners, etc, whatyou can do is if one of you is a 0% taxpayer and the other one is a 20% taxpayer, the 0% taxpayer can transfer ten percent of their personal allowance to their husband, wife, spouse, or civil partner.

This means the higher-level taxpayer, as long as it’s a twenty percent taxpayer, can get twenty percent tax relief on the extra bit of marriage allowance, which can be a chunky bit of tax saving.

It’s only for income tax. It’s not for national insurance.

It is just a transfer of ten percent of your personal allowance to the other half to increase their income tax personal allowance.

So during the pandemic and in some cases may still still carry on depending on what you do, one of you might not earn anough and be a 0% income tax taxpayer. Normally, you wouldn’t be, but one of you now might be. What you can do on your tax return, is opt to transfer this ten percent. All you have to do is tick the box to say, yes, I want to transfer the allowance and then fill in your other half’s details – their full name, date of birth, national insurance number, and the date you got married. OK, that’s a tricky one for some people. Try not to don’t embarrass yourself and ask your other half when you got married. That might not get down too well. Put that in your tax return and HMRC, for that tax year, will do a ten percent transfer allowance from the lower earner to the higher earner.

Even if the higher owner doesn’t have to do a tax return, that’s fine because the adjustment will come through on their PAYE system and effectively they get more income in the months ahead.

Canceling the Marriage Transfer Allowance?

Once you’ve done it, it tends to continue until you tell HMRC to stop. Now as we come out of the pandemic, come people get back to normal, whatever normal really is, then you can contact HMRC to cancel the arrangement. You can do it via your online account or indeed by telephone or post. Telephone often takes a long time on hold, and post can take a few months to get answerred.

Once done, won’t be transferring ten percent of your personal allowance to your other half.

Now it is only if you are a 0% taxpayer to a 20% taxpayer that you can do this transfer.

You cannot do the transfer if you’re a 0% taxpayer and the other half is a 40% taxpayer.  no, no, no.

Now the interesting thing is if you have got it already set up, it does continue. If HMRC then notices that actually, you have now become a twenty percent taxpayer, they will turn around. They’ll recalculate your tax return and say, the marriage transfer has been canceled because it gives you no benefit. However, sometimes it might be a case of the lower taxpayer will just pay a bit of 20% tax if the allowance goes ahead, but the savings to the partner is greater if you keep the transfer in play.

That is absolutely fine.

If the spouse dies in the year, there are special rules for the year of death, and you will get that transfer allowance in full.

So there you go, marriage transfer allowance. It’s a bit of a way to get a bit of a tax saving and given that they’ve just increased interest rates again, the cost of fuel when I was coming up to Garsington for diesel being 199.9 a litre, every tittle helps.

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