Personal Allowance

[DLT3922]

This may seem like a silly question but does the £12,570 tax free allowance apply to both husband and wife separately? In other words, as a couple they could each receive an annual income of less than £12,570 and not be required to pay income tax?
Thank you

[Lambs]

D,

This is NOT a silly question: if you don't know, you don't know. In fact legally married couples were broadly taxed as a "single unit" up until the early 1990s.

But yes, the UK Personal Allowance now applies separately to each individual taxpayer, in relation to their own income, etc. This is the case for individuals, for spouses and (or) civil partners.

Each spouse/civil partner is therefore entitled to their own £12,570 Personal Allowance.

But there are special rules - generally helpful - that recognise the close relationship between spouses and civil partners so, for example:

1 They can transfer assets between one another without triggering a taxable capital gain

2 One spouse can sacrifice 10% of their Personal Allowance so that the other spouse's Income Tax bill should be reduced by up to £250. This is the so-called "Marriage Allowance" (not to be confused with the old Married Couples' Allowance), and it can be particularly useful where one spouse risks wasting some or all of their £12,570 Allowance (although there may be some other, more niche scenarios where it is helpful as well). However, this transfer/special allowance is prohibited basically where either spouse (or civil partner) has enough income that they are subject to the 40% Higher Rate of Income Tax.

Either of these may be particularly helpful if one spouse is paying a fair bit of tax but the other is not (or not at all). Or both measures may assist, depending on the particular circumstances.

Kind regards,

Lambs