Marriage Allowance

By December 15, 2015Payroll Outsourcing

Marriage Allowance

HMRC would like companies to encourage their workers to apply for the new Marriage Allowance earlier in the tax year.  Your staff can still apply for a tax code change this tax year, but need to hurry.  The savings are processed through payroll, and will take little or no effort for the employer.

The Marriage Allowance allows a husband, wife or civil partner transfer £1060 of their personal tax allowance.  This tax year this would mean a saving of £212 for that person.  The application process is online and can be accessed here.  There is also an online calculator available where employees can see how much tax could be saved.

Who should apply?

There are three criteria that should be met before the application is started:

  1. both partners were born after the 6th April 1935
  2. the transferer income is £10 600 or less
  3. the transferee income is between £10600 and £42 385

This is current advice for the tax year ending April 2016, for the latest guidance go directly to HMRC.

How does it work?

HMRC will issue tax coding notices to both parties, and these will be issued to the employer in the form of a P6 tax coding notification.  The employer should not change the tax code through payroll based on an employee notification, but should wait for the coding instruction from HMRC.  Once the P6 arrives the tax code can be changed through the normal payroll process.

The transferer will receive an ‘N’ code, for example 954N, and the transferee an ‘M’ code, for example 1166M.  These tax codes will be used by your payroll service to alter the personal tax allowances and so enable the saving to be passed across.

There is no need for an employer to be aware of any of this, especially if they are using a payroll outsourcing company, but it may be helpful to raise awareness of this tax break in the work place.