Family finance expert Julie Hutchison delivers some good news for stay at home parents in this month’s guest post for Dadbloguk.com.
**UPDATE 24/2/2015 – If you wish to apply for the married couples tax break mentioned in this article, please follow this link. Registration opened on 20/2/2015**
Should marriage and civil partnership be rewarded in our tax system? There are various examples of where it is (inheritance tax and the new ISA allowance transfer rules, to name just two).
Another new tax benefit arrives on 6 April 2015, which could help the finances of over 4 million couples, and is particularly relevant where one is a stay-at-home-parent.
From 6th April, part of any unused income tax personal allowance will be transferable from one spouse or civil partner to the other. But it’s not automatic and you have to claim it.
Here’s how it works – if you’re a stay-at-home parent who doesn’t have enough income to fully use your personal allowance in tax year 2015/16, your spouse or civil partner may get a tax cut of up to £212 from 6 April, if you transfer some of your unused allowance to him or her. This only applies if your spouse or civil partner pays income tax at 20 per cent, which means it’s targeted to not benefit higher earners.
In short, as a couple, you could have up to £212 more in your household’s pocket as a result of this transferable income tax allowance. Let’s look at an example.
Tom is a stay-at-home dad and is married to Sue, who has a job with a salary of £39,000. Tom does some part-time work on a freelance basis. In tax year 2015/16 his total income is £8,000. This doesn’t use up his whole income tax personal allowance of £10,600, which means he doesn’t pay income tax on it. And because £2,600 hasn’t been used, he can apply to transfer the maximum £1,060 to Sue. This means an extra £1,060 of Sue’s income won’t be taxed at 20%, giving her a tax cut of £212. It’s likely that this would be done by a change in Sue’s PAYE code.
How do you go about claiming it? Final details are due out before April, with an online process expected. I’ll post comments below this blog with an update when the online process has gone live, so you can follow-up if this is relevant for you.
Do post below if you have any questions.
This blog and any responses to comments are not financial advice.
Julie is a regular blogger at moneyplusblog.
Photo credit: Calita Kabir, sourced from http://flikr.com. Reproduced under Creative Commons 2.0 agreement. Link to the agreement can be found in the paragraph below.
This post was written in association with Standard Life and I was compensated for adminstering the content. For more information about collaborative posts please follow this link.