Transferable tax allowance for married couples

04 July 2014

In the Autumn Statement on 5 December 2013 the Chancellor announced a new ‘Transferable tax allowance for married couples’. HMRC have now published details of how this will operate.

The HMRC statement reads as follows:

With effect from the 2015-16 tax year, a spouse or civil partner who is not liable to Income Tax or not liable above the basic rate for a tax year will be entitled to transfer £1,050 of their personal allowance to their spouse or civil partner provided that the recipient of the transfer is not liable to Income Tax above the basic rate. The transferor’s personal allowance will be reduced by £1,050. The spouse or civil partner receiving the transferred allowance will be entitled to a reduced Income Tax liability of up to £210.

We are currently looking at how the claims process will work and further details will be set out in due course. However we propose to introduce two new tax code suffixes in order to facilitate the transferable allowance, and use an ‘N’ suffix for the ‘transferor’ and an ‘M’ suffix for the ‘recipient’ for those PAYE customers currently on an ‘L’ suffix code. The new tax code suffixes ‘M’ & ‘N’ will operate in exactly the same way as the existing suffix codes ‘L’, ‘P’, ‘T’ and ‘Y’

The new suffixes will be allocated when processing the initial claims and individuals notified about their new tax code, BUT the P9X procedures (rather than individual P9 tax codes) will be used to facilitate subsequent uplifts. There will of course still be customers who are on something other than an ‘L’ suffix code e.g. ‘’K’ prefix or ‘P’ suffix for whom an individual P9 will still be required.

The new tax suffixes will not be used on tax codes until April 2015 at the earliest and so will not be included on the 2015-16 P9 tax codes issued in January, February and March 2015.