Transferrable personal allowances

6 February 2015

In the Autumn Statement 2013, the Chancellor announced that from April 2015 it will be possible to transfer up to 10% of your unused personal allowance to a spouse or civil partner.  This amount will be £1,060 following the uplift in the standard personal allowance from April 2015 to £10,600.  The transferred personal allowance will act as a tax reducer for the recipient. The recipient’s tax liability will be reduced by 20% of the amount transferred, regardless of the marginal rate of income tax for either party.

Married couples who are eligible to claim the Married Couples Allowance (MCA) will not be able to make a transfer.  The MCA is only available where at least one of the spouses, or civil partners, was born before 6 April 1935.

Who will be affected?

This will be available to couples provided that neither spouse nor civil partner is a higher or additional rate taxpayer. Additionally, it will not be available to non-UK domiciled individuals who elect to pay tax on the remittance basis of taxation or non-UK residents who would be higher or additional rate taxpayers if their worldwide income was within the scope of UK tax.

Our view

The measure will primarily benefit single earner households, where the personal allowance of a non-earning spouse was previously wasted.  Transfers of the personal allowance from individuals who have the entire amount remaining will generate tax relief totalling £212 (£1,060 x 20%).

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