Are you using all your taxable allowances?
From April 2015, HMRC are introducing “transferrable tax allowances” where spouses and civil partners can effectively benefit as a unit by transferring part of their personal allowance to their “other half” if mutually beneficial.
Typically, it would be beneficial to transfer when one partner earns no income, perhaps a “stay at home” mum whose personal allowance is not utilised at all.
Alternatively, if one partner only earns dividend income, their personal allowance is also not of use, as the 10% tax credit cannot be claimed.
How much can be transferred?
10% of the personal allowance
can be transferred. For 15/16 this means £1,060 (10% of £10,600).
Broadly, this results in over £200 in tax savings.
The terms of the transfer
Transfers can be made between:
- Spouses, or
- Civil partners
The transferor must:
- Be a non-taxpayer, or
- Pay tax at the basic rate, dividend rate or starting savings rate
The transferee must:
- Pay tax at basic rate, dividend rate or starting savings rate
These rules have been implemented to eliminate transfers to a higher rate or top rate taxpayer.
How to make a transfer
An election needs to be made for the transfer however this can be made up to four years following a tax year. If the transfer is made within the tax year though, it will be continued for future years, until the election is withdrawn.
Figurit can advice further if it benefits you and your spouse or civil partner to utilise transferrable tax allowances from this year. Call today to discuss.
020 7376 9333