Case Study 2 – Using Marriage Allowance rules to reduce tax bill


Richard and Paula are existing clients of ours and are both retired. Following their annual review with us, it became apparent that Richard had suddenly started paying tax at the basic rate of 20%.

Richard hadn’t noticed that tax was being taken from his income, but on investigation we found that his state pension had increased, as had his income from a private company pension. These increases in pension income used up all his personal allowance (the amount of income a person can get before they pay tax), meaning he was paying 20% tax on income above the personal allowance.

Richard’s wife Paula only receives her State Pension as income, which does not use up her personal allowance, so we could consider making use of the Marriage Allowance (2015) legislation, whereby a person who is a non-tax payer can transfer some of their personal allowance to their spouse or civil partner (for basic rate tax payers only).

By taking advantage of these rules, Paula was able to give 10% of her personal allowance to Richard which significantly reduced the amount of his income that was eligible to be taxed. As a result, he has saved £662 in tax over the last three tax years.

It only took us a few minutes to help Richard complete the simple online application process, and was well worth the time it took. Had Richard and Paula not been in receipt of professional financial advice, Richard could well have continued paying unnecessary tax unnoticed.

If you are interested in utilising the Marriage Allowance, visit the Govenment website to apply.