Some of your clients may be aware of this possibility and it has been in the news recently, as the Government state that two million entitled couples have not claimed transferable marriage allowance. Now may be a good time ensure whether they can claim this relief. References in this article to marriage also include civil partnerships.
An individual is entitled to a tax reduction for a tax year at the basic rate of tax on the transferable amount if a claim is made and:
- the individual is married to a person who makes an election which is in force for the tax year;
- the individual is not, for the relevant year, liable to tax at a rate other than the basic rate, the dividend ordinary rate or the starting rate for savings;
- the individual meets the requirements of s56 ITA 2007 (residence, etc.) for that year; and
- neither the individual nor their spouse makes a claim for the tax year under ss45 or 46 ITA 2007 (married couple's allowance - marriages, etc. before/on or after 5 December 2005).
The amount available
The transferable amount for 2017/18 is £1,150 and for subsequent tax years is 10% of the personal allowance for the tax year to which the reduction relates. The amount is to be rounded up to the nearest £10 where appropriate.
If an individual is entitled to a tax reduction, the personal allowance of the individual's spouse is reduced accordingly. If an individual who is entitled to a tax reduction for a tax year dies during that year, this rule is ignored.
Changes in circumstances
There are some complex rules to deal with changes in couples during a year and for time limits for claims. The main point to note, though, is that an individual is not entitled to more than one tax reduction for a tax year or to have more than one election for a tax year, regardless of whether the individual is a party to more than one marriage.
In addition, an individual is not entitled to have more than one election which operates for a tax year, regardless of whether the individual is a party to more than one marriage in that year.
Finally, in the Autumn Budget the Government has moved to resolve a problem with this relief where a claim was not made and the spouse subsequently died. This change will enable an individual whose spouse or civil partner is deceased to make an application for the relief, and for the claim to be backdated for up to four years where the entitlement conditions are met.
Tax is never simple, so forewarned is forearmed!