ICAS ICAS logo

Quicklinks

  1. About Us

    Find out about who we are and what we do here at ICAS.

  2. Find a CA

    Search our directory of individual CAs and Member organisations by name, location and professional criteria.

  3. CA Magazine

    View the latest issues of the dedicated magazine for ICAS Chartered Accountants.

  4. Contact Us

    Get in touch with ICAS by phone, email or post, with dedicated contacts for Members, Students and firms.

Login
  • Annual renewal
  • About us
  • Contact us
  • Find a CA
  1. About us
    1. Governance
  2. Members
    1. Become a member
    2. Newly qualified
    3. Manage my membership
    4. Benefits of membership
    5. Careers support
    6. Mentoring
    7. CA Wellbeing
    8. More for Members
    9. Area networks
    10. International communities
    11. Get involved
    12. Top Young CAs
    13. Career breaks
    14. ICAS podcast
    15. Newly admitted members 2022
    16. Newly admitted members 2023
  3. CA Students
    1. Student information
    2. Student resources
    3. Learning requirements
    4. Learning updates
    5. Learning blog
    6. Totum Pro | Student discount card
    7. CA Student wellbeing
  4. Become a CA
    1. How to become a CA
    2. Routes to becoming a CA
    3. CA Stories
    4. Find a training agreement
    5. Why become a CA
    6. Qualification information
    7. University exemptions
  5. Employers
    1. Become an Authorised Training Office
    2. Resources for Authorised Training Offices
    3. Professional entry
    4. Apprenticeships
  6. Find a CA
  7. ICAS events
    1. CA Summit
  8. CA magazine
  9. Insight
    1. Finance + Trust
    2. Finance + Technology
    3. Finance + EDI
    4. Finance + Mental Fitness
    5. Finance + Leadership
    6. Finance + Sustainability
  10. Professional resources
    1. Anti-money laundering
    2. Audit and assurance
    3. Brexit
    4. Business and governance
    5. Charities
    6. Coronavirus
    7. Corporate and financial reporting
    8. Cyber security
    9. Ethics
    10. Insolvency
    11. ICAS Research
    12. Pensions
    13. Practice
    14. Public sector
    15. Sustainability
    16. Tax
  11. CPD - professional development
    1. CPD courses and qualifications
    2. CPD news and updates
    3. CPD support and advice
  12. Regulation
    1. Complaints and sanctions
    2. Regulatory authorisations
    3. Guidance and help sheets
    4. Regulatory monitoring
  13. CA jobs
    1. CA jobs partner: Rutherford Cross
    2. Resources for your job search
    3. Advertise with CA jobs
    4. Hays | A Trusted ICAS CA Jobs Partner
    5. Azets | What's your ambition?
  14. Work at ICAS
    1. Business centres
    2. Meet our team
    3. Benefits
    4. Vacancies
    5. Imagine your career at ICAS
  15. Contact us
    1. Technical and regulation queries
    2. ICAS logo request

Tax: Marriage allowance opportunity

  • LinkedIn (opens new window)
  • Twitter (opens new window)
Donald Drysdale By Donald Drysdale for ICAS

6 November 2019

Main points

  • The transferable ‘marriage allowance’ was introduced with effect from 2015/16.
  • The 4-year time limit for electing for this to apply in 2015/16 expires on 5 April 2020.
  • Scotland’s higher-rate tax threshold restricts the availability of marriage allowance to Scottish taxpayers, compared with those in the rest of the UK.

With 5 April 2020 only five months away, Donald Drysdale notes the importance of this date for electing for ‘marriage allowance’ – not to be confused with ‘married couple’s allowance’.

Introduction

The transferable tax allowance for married couples and civil partners (commonly known as the ‘marriage allowance’) was introduced with effect from 2015/16.

Where one party (referred to in the legislation as ‘the gaining party’, and in this article as ‘the transferee’) has income below certain limits, the marriage allowance enables a specified amount of personal allowance to be transferred to them by their spouse or civil partner.

The amount that can be transferred is 10% of the transferor’s personal allowance (rounded up to the nearest £10). The benefit to the transferee is not an additional personal allowance; instead, it is a tax reduction of 20% of the amount transferred.

The transferable allowance for 2019/20 is £1,250, so the maximum tax saving arising from an election for marriage allowance for this year is £250. If an election were to be made now for all five years from 2015/16 through 2019/20, the total tax saved could be as high as £1,150.

The legislation governing marriage allowance can be found in Income Tax Act 2007 sections 55A–55E.

Conditions

The transferee (the spouse or civil partner to whom the marriage allowance is transferred) must be a UK resident or fall into one of a number of categories of non-resident entitled to UK personal allowance.

The transferee must not be liable to income tax at a rate other than the basic rate, default basic rate, savings basic rate, Scottish basic rate, any Scottish rate below the Scottish basic rate (e.g. Scottish starter rate), Scottish intermediate rate, Welsh basic rate, dividend ordinary rate, dividend nil rate, savings nil rate or starting rate for savings – in other words, their income must be below the higher rate threshold.

Marriage allowance can apply only where the above conditions are met, where an election by the transferor is in force for the tax year, and where neither party has claimed ‘married couple's allowance’ – a completely different allowance which is explained below.

Position on death

Since 29 November 2017, it has been possible for an individual to elect to transfer marriage allowance to their deceased spouse or civil partner. Likewise, a deceased individual's personal representatives can make any marriage allowance election that the deceased could have made.

Notwithstanding that the law was changed on 29 November 2017, these provisions apply even where the death occurred before that date. This backdates the change to 2015/16, when the transferable tax allowance was introduced.

Deadline ahead

There is a four-year time limit within which an election for marriage allowance may be made by the transferor (or, if applicable, by the transferor’s personal representatives). Therefore 5 April 2020 will be the last date on which such an election may be made for 2015/16.

If an election is made after the end of the tax year in question, it applies for that year only. If made in-year, it applies for that and all subsequent years until it is withdrawn, or until it becomes ineffective because in a particular year the necessary conditions are not met.

An election made by personal representatives is irrevocable. In other cases an election may be withdrawn only by the transferor who made it. Normally withdrawal takes effect from the following year, but it may apply for the current year in cases where a marriage or civil partnership ends.

Devolution twist

Marriage allowance is a matter reserved to Westminster. However, the means-testing which restricts it from those liable at the higher or additional/top rates of tax impacts adversely on Scottish taxpayers, because they are subject to the harsher tax rates and thresholds set by Holyrood.

Broadly, for 2017/18, when the basic rate was 20% both north and south of the border, a marriage allowance transferee had to have an income not exceeding £43,000 if a Scottish taxpayer – or an income not exceeding £45,000 if a taxpayer elsewhere in the UK.

Since then the tax rates and thresholds have diverged further. For 2019/20, a Scottish taxpayer can only receive a marriage allowance transfer if their income does not exceed £43,430, whereas the limit for a taxpayer elsewhere in the UK is £50,000.

This substantial difference in treatment may seem unfair in the case of what was intended to be a UK-wide tax allowance, but is an inevitable result of the way the Scottish Government has chosen to exercise its devolved tax powers.

Given that some 44% of adults in Scotland don’t pay income tax, it is probable that many of them have spouses or civil partners eligible to elect for marriage allowance. It is also probable that many are not making the election because they don’t know how to do so.

Practical difficulties

Marriage allowance can be applied for online, but it is widely misunderstood. Only last year, HMRC confirmed that about one in four of the 4.2 million couples eligible for it were failing to elect for it.

For young and middle-aged couples who (typically) have two incomes, electing presents practical difficulties. For example, are they aware of the allowance? Are they eligible? And, if so, which party should elect for the allowance?

For older couples, the process is equally frustrating, and there may be many instances where they are eligible but fail to elect.

In an ideal world, HMRC would hold sufficient data to determine who is eligible to elect for marriage allowance, and they would calculate it and apply it automatically. However, it seems that this is not feasible in a regime based broadly on independent taxation of each individual.

Married couple’s allowance

Unsurprisingly, many taxpayers confuse marriage allowance with married couple’s allowance. A taxpayer may claim the latter if they are married or in a civil partnership, and living with their spouse or civil partner, and at least one of them was born before 6 April 1935.

For this purpose they can still be treated as living together if they are unable to do so because of illness or old age (e.g. if one of them is in residential care), or if one is working away from home, away on an armed forces posting, in prison, or away on training or education.

The married couple’s allowance reduces the claimant’s income tax liability by 10% of the amount of the allowance. For 2019/20 the full allowance is £8,915, giving rise to a maximum income tax saving of £891.50.

Article supplied by Taxing Words Ltd

Edinburgh

Scots face escalating Budget risks

By Donald Drysdale for ICAS

13 June 2019

What do tax reliefs really cost?

By Donald Drysdale for ICAS

28 February 2019

2022-11-mitigo 2022-11-mitigo
ICAS logo

Footer links

  • Contact us
  • Terms and conditions
  • Modern slavery statement
  • Privacy notice
  • CA magazine

Connect with ICAS

  • Facebook (opens new window) Facebook Icon
  • Twitter (opens new window) Twitter Icon
  • LinkedIn (opens new window) LinkedIn Icon
  • Instagram (opens new window) Instagram Icon

ICAS is a member of the following bodies

  • Consultative Committee of Accountancy Bodies (opens new window) Consultative Committee of Accountancy Bodies logo
  • Chartered Accountants Worldwide (opens new window) Chartered Accountants Worldwide logo
  • Global Accounting Alliance (opens new window) Global Accounting Alliance
  • International Federation of Accountants (opens new window) IFAC
  • Access Accountancy (opens new window) Access Acountancy

Charities

  • ICAS Foundation (opens new window) ICAS Foundation
  • SCABA (opens new window) scaba

Accreditations

  • ISO 9001 - RGB (opens new window)
© ICAS 2022

The mark and designation “CA” is a registered trade mark of The Institute of Chartered Accountants of Scotland (ICAS), and is available for use in the UK and EU only to members of ICAS. If you are not a member of ICAS, you should not use the “CA” mark and designation in the UK or EU in relation to accountancy, tax or insolvency services. The mark and designation “Chartered Accountant” is a registered trade mark of ICAS, the Institute of Chartered Accountants of England and Wales and Chartered Accountants Ireland. If you are not a member of one of these organisations, you should not use the “Chartered Accountant” mark and designation in the UK or EU in relation to these services. Further restrictions on the use of these marks also apply where you are a member.

ICAS logo

Our cookie policy

ICAS.com uses cookies which are essential for our website to work. We would also like to use analytical cookies to help us improve our website and your user experience. Any data collected is anonymised. Please have a look at the further information in our cookie policy and confirm if you are happy for us to use analytical cookies: