Q. I am an employee and pay basic rate tax under PAYE each month. My wife works part-time and earns £10,000 per annum and does not pay any tax. Can I benefit from her unused personal tax allowance?
A. Since April 2015, it has been possible for a spouse or civil partner who is not liable to income tax or not liable above the basic rate for a tax year to transfer part 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 the same amount. For 2017/18 the amount that can be transferred is £1,150. The person receiving the allowance will be entitled to a reduced income tax liability of up to £230 for 2017/18. Note that married couples or civil partnerships entitled to claim the married couple's allowance are not, however, entitled to make a transfer.
Eligible couples can backdate their claim for the allowance for up to four years. This means that couples will have until 5 April 2020 to backdate their claim to the 2015/16 tax year when the allowance was first introduced.