What tax allowances am I entitled to?
Most tax allowances work by reducing your taxable income to reduce the amount of income tax you pay. This means that you can have a certain amount of taxable income each year, tax free. You only pay income tax on taxable income that is above your tax allowance.
If you are resident in the UK, but not domiciled in the UK and you claim to use the ‘remittance basis’ of taxation, you may not be eligible for UK tax allowances. More information on residence and domicile can be found in our 'migrants section'.
The personal allowance is 11,000 for 2016/17.
There is more information on the personal allowance, including an example, in our ‘tax basics section’.
If you were born before 6 April 1938, you used to be able to claim a higher personal allowance. This was known as the 'age-related allowance' and was available up to the 2015/16 tax year. It is explained in our archived material.
Blind person's allowance (BPA) reduces the amount of taxable income that you have to pay tax on. If you are eligible for BPA, you are entitled to it in addition to the personal allowance.
The BPA for 2016/17 is £2,290.
If you are entitled to BPA, you must tell HMRC in order to claim it – find out on GOV.UK.
You do not have to be entirely without sight to claim the BPA, but you do have to meet certain criteria depending on where in the UK you live.
There is more information on the eligibility criteria for BPA in the ‘tax basics section’.
The married couple’s allowance (MCA) does not reduce the amount of taxable income on which you pay tax. It is used to calculate an amount to reduce your tax bill instead.
You are only entitled to MCA if you are married or in a civil partnership and at least one of you was born before 6 April 1935.
MCA works by deducting 10% of the allowance from the tax due on your taxable income.
For 2016/17 the full allowance is £8,355. This means you get a maximum deduction of £835.50 from your income tax, but note that this amount can never be refunded to you even if you have no tax liability.
The amount of MCA you get can be affected by the level of your income. If your income is more than £27,700 in 2016/17, you might not be entitled to the full MCA.
There is only one MCA per married couple or civil partnership.
What is the living together requirement?
MCA is due for each tax year that you are living together as husband and wife or civil partners. You also get the full allowance, subject to income levels, in the year of separation, divorce or the death of either spouse/civil partner. If you are separated for reasons beyond your control – such as one of you having to go into residential care – HMRC should still treat you as living together for purposes of MCA.
Look at the example Frank and Sue.
Do I get MCA in the year of death?
In the year your spouse or civil partner dies you should also get the balance of MCA not used against their income without needing to make a claim, but HMRC have been known to miss this point so do check you get it.
Look at the example Roger.
Do I get MCA in the year of marriage?
In the year of marriage or registration of a civil partnership, the amount you are entitled to is one twelfth of the allowance for each complete tax month – starting on 6 of the month – that you were married.
Let HMRC know as soon as possible if you marry or register a civil partnership in a tax year and qualify because one of you was born before 6 April 1935. You will get your tax relief quicker.
Look at the example Jock and Marie.
Which one of us claims the MCA?
If you are part of a married couple, who qualified for the allowance before 5 December 2005, the MCA is automatically given to the husband. However, a married woman can:
- choose to have up to £1,610 of it herself – £161 off her tax; or
- have £3,220 if both husband and wife agree – worth £322 off her tax bill.
The balance is used to reduce the husband's tax bill. But if there is any further surplus MCA remaining unused by the husband by the end of the tax year, the couple can claim to transfer it to the wife.
If you are part of a married couple or civil partnership, who first qualify for MCA from 5 December 2005 onwards, MCA is given to the partner with the higher income. The other partner can:
- choose to have up to £1,610 of the MCA – £161 off their tax; or
- have £3,220 if both partners agree – worth £322 off their tax.
The rest has to be taken off the tax bill of the partner entitled to the allowance. If there is any surplus MCA remaining unused by the higher earning civil partner or spouse by the end of the tax year, the couple can claim to transfer it to the other civil partner or spouse.
It is also possible for a couple who married before 5 December 2005 to elect for the new rules to apply to them. HMRC will be able to help you make the change if you contact them.
The MCA can be reduced for a couple when:
- for those married before 5 December 2005, the husband's income is above an amount set for each year – £27,700 for 2016/17. The income of the wife is never taken into account; or
- for those married or registered after 5 December 2005, the higher earning spouse or civil partner's income is above an amount set for each year – £27,700 for 2016/17. The income of the lower earning spouse or civil partner is never taken into account.
The minimum MCA that you can receive is £3,220 for 2016/17 – £322 off your tax bill – and you are entitled to this amount no matter how much income you have.
The income limit is £27,700 for 2016/17.
To work out what MCA you are entitled to, you must carry out the following calculation:
- Work out your income before allowances (see note below);
- Work out the amount by which your income exceeds the limit for reducing your MCA;
- Divide the difference by two;
- Take that figure off the total MCA to leave the MCA available (but only as far as the minimum amount).
For example Josh shows this calculation.
Income before allowances
Note that if the husband or the higher earning spouse or civil partner has income of £37,970 in the 2016/17 tax year, you will only receive the minimum MCA for 2016/17.
For couples who married before 5 December 2005 and who have not elected for the post-5 December 2005 regime to apply, the MCA is always based on the level of the husband's income and never that of the wife or joint incomes. It may be worth transferring investments from husband to wife if the income restriction is likely to apply to your MCA, but you need to be aware that those investments then belong to the wife for all purposes.
From 5 December 2005 civil partnerships and also new marriages meeting the age criteria have an allowance given to the spouse or civil partner with the highest income. Again, the lower earner’s income is not taken into account in calculating any MCA restriction. There is no change to the arrangements for pre-existing marriages unless you elect to be treated in the same way as a new marriage. But take care, if the wife’s income is higher than the husband’s, you would not wish to make this election to be treated as a ’post-5 December 2005 marriage’, as you would get less MCA.
What is the relief for maintenance payments?
You can find information on the relief for maintenance payments in our ‘tax basics section’.
We are often asked if married couples or civil partners can transfer their tax allowances to their spouse or partner if they do not use them. Some allowances are transferable, but others are not.
Marriage allowance or transferable tax allowance
You can only transfer some of your personal allowance to your spouse or civil partner if you meet certain conditions. This is known as the transferable tax allowance for married couples and civil partners or “marriage allowance”. Note that this is not an extra allowance – it is part of the personal allowance.
The marriage allowance is only available to spouses and civil partners born after 5 April 1935. The allowance for 2016/17 is £1,100. Under the rules, a spouse or civil partner who is not liable to income tax may transfer £1,100 of their personal allowance to their spouse or civil partner. The recipient spouse or civil partner must not be liable to income tax above the basic rate.
You can apply for the marriage allowance on the GOV.UK website.
You can see how the marriage allowance works in our ‘tax basics section’.
Blind person's allowance
You can transfer the BPA to your spouse or civil partner if your income is too low to make use of it. Your surplus BPA can then reduce their taxable income for tax purposes. If you are a non-taxpayer and your spouse or civil partner pays tax you can still transfer your BPA to them. You can transfer the BPA by contacting HMRC.
Married couple's allowance
You can transfer the MCA to your spouse or civil partner if your income is too low to make use of it.
If you decide to share the MCA or transfer the minimum MCA before the start of the next tax year, you can complete and submit form 18. Using this form, you can transfer the minimum MCA – £3,220 for 2016/17 – to your spouse or civil partner with effect from the start of the next tax year. The claim continues to apply until you withdraw it.
If you find after the end of the tax year, that your income was not high enough to use your full MCA, you can ask for the balance, or ‘surplus’, to be transferred to your spouse or civil partner. You use form 575 to request a transfer of the surplus MCA.
Look at the example Jim to see how this works.
If you are claiming both BPA and MCA you cannot transfer the surplus of one allowance and not the other. You must transfer both allowances together.
Look at the example Patrick to see how this works.
How does marriage separation affect my tax allowances?
For information on how marriage separation affects your tax allowances, look at our ‘tax basics section’.
What are the personal savings and dividend tax allowances?
These ‘allowances’ are not really allowances at all; they are amounts of savings and dividend income that you can have and on which tax will be due but at a rate of 0%. The income is therefore still ‘taxable’ but no tax is actually payable on it.
The personal savings allowance for 2016/17 is £1,000 for basic rate taxpayers and £500 for higher rate taxpayers (reducing to zero if you are an additional rate taxpayer). It is also called the ‘savings nil rate’. There is more information in the ‘tax basics section’ and the ‘savings and tax section’.
The dividend tax allowance for 2016/17 is £5,000. It is also called the ‘dividend nil rate’.
Frank and Sue, both born before 6 April 1935, separated during the current tax year 2016/17. Frank's income for the year was £15,000. He receives the full MCA of £8,355 giving him £835.50 off his tax bill.
Roger, born in 1933, died during 2016/17. His income before allowances was £11,660 and the tax he was due to pay for the year amounted to £132. His MCA was worth £835.50 so the balance of £703 is available for his widow to use against her tax bill.
Jock and Marie, both born in 1934, get married on 24 May 2016. Marie has only state pension and Jock has income before allowances of £15,000. His MCA for 2016/17 is £8,355 x 10/12 or £6,963. Jock can therefore deduct £693.30 from his tax liability for 2016/17.
Jim was born in 1933. His income before allowances for 2016/17 was £13,000 and the tax he was due to pay for the year amounted to £400. His MCA was £8,355 @ 10% or £835 so the balance of £835 - £400 = £435 is available for his wife to use against her tax liability. He must apply to transfer the surplus using form 575.
Patrick was born before 6 April 1935 and is married to Jan who is two years younger. His taxable income before allowances for 2016/17 is £6,500 and is less than his personal allowance. Patrick claims BPA and therefore £2,290 can be transferred to Jan, reducing the income she has that is charged to tax. Jan will also receive Patrick's MCA.
Josh has income before allowances of £31,400 for 2016/17. He was born in 1931 and his wife was born in 1934. Josh’s income has exceeded the limit of £27,700 meaning his MCA will be reduced.
|Income before allowances||31,400|
|Divided by 2||1,850|
Josh can deduct £6,505 @ 10% or £650.50 from his 2016/17 tax bill.
Where can I find more information?
For more information on tax allowances, you may find the following section of this website helpful:
- age-related personal allowances for those born before 6 April 1938 applied up to 5 April 2016. These are described separately for those reviewing their 2015/16 tax;
- there is more information, including examples, on the personal allowance, in the 'tax basics section' of this website;
- there is more information, including examples, on the blind person's allowance, in the 'tax basics section' of this website.