The days before the end of the tax year are a good time for advisers to ensure that their clients have claimed all tax reliefs and allowances to which they are entitled, before another year falls out of reckoning.
Claims for repayments of tax for a year of assessment can still be made for four years following the end of that year (TMA 1970, section 43). This means that it is still possible to claim a repayment due for the year 2014/15 onwards, so long as action is taken before 5 April 2019.
In the case of a married couple or civil partners, it is particularly important to check their eligibility to the ‘marriage allowance’, or to give it its full name, the ‘transferable tax allowance for married couples and civil partners’ (ITA 2007, sections 55A-55E). This is not an allowance in its own right, but a mechanism by which a lower-earning spouse or civil partner (hereafter ‘spouse’) can transfer one tenth of their personal allowance to the other, higher-earning, spouse so long as neither pays tax at a rate higher than the UK basic rate or the Scottish intermediate rate during the tax year in question.
The relief must be claimed by the transferring spouse, whose personal allowance is reduced by one tenth while the recipient’s allowance is increased by the same amount. One tenth of the personal allowance for 2018/19 is £1,185. The transferring spouse’s allowance is thereby reduced to £10,665 (£11,850 - £1,185) while the recipient’s allowance is increased to £13,035 (£11,850 + £1,185). The transfer generates a tax repayment to the recipient equal to 20% of the amount transferred, or £237. Thus, provided that the transferring spouse still pays no tax after their personal allowance is reduced by £1,185, claiming the allowance is worth £237 to the couple.
The marriage allowance was introduced for the year 2015/16, so it is still possible to claim for that year until 5 April 2020.
The easiest way to claim is for the transferring spouse to call the income tax helpline on 0300 200 3300 quoting their national insurance number, or through self-assessment. The worst option is to let a high-volume repayment agent make the claim on one’s behalf, as one then loses a sizeable chunk of the repayment in fees (and some such agents do not check eligibility as carefully as they should).
How much income can the lower-income spouse have?
It is misleading to suggest that the lower-income spouse must have income of less than the personal allowance. It is entirely possible for them to claim if they are a non-taxpayer because (for example) they qualify for the personal savings allowance, dividend allowance, zero percent starting rate on savings, or the trading or property income allowance.
What if a spouse has died?
When the marriage allowance was introduced, both parties had to be alive in order for a claim to be made. Much resentment at this state of affairs was channelled through the CIOT and LITRG, resulting in a change in the law from Autumn Budget day (29 November) 2017. The personal representatives of a deceased spouse can now transfer one tenth of their personal allowance to the surviving spouse, or the surviving spouse can transfer one tenth of their personal allowance to the personal representatives of the deceased spouse, for any year in which the deceased spouse was alive, including the tax year of death. Again, this can be back-dated by up to four years so that every year from 2015/16 is covered, provided the claim is made before 6 April 2020.
The married couple’s allowance
The marriage allowance is not to be confused with the married couple’s allowance (MCA) which can still be claimed if one party to the marriage or civil partnership was born before 6 April 1935. People who are eligible to claim the MCA cannot claim the marriage allowance; but the MCA, though fiendishly complicated, is financially more beneficial.
Robin Williamson MBE CTA (Fellow) is an author and commentator on tax, welfare and public policy, and a part-time senior policy adviser at the Office of Tax Simplification. He was technical director of the CIOT’s Low Incomes Tax Reform Group from 2003 to 2018.