Sunday, 29 November 2015


The new rates for social security benefits from April were quietly issued on Thursday 26 November in a written statement in the House of Lords by Pensions Minister Baroness Altmann. It linked to fifteen pages listing every DWP payment, what it is this year and what it will be for 2016/17. And the two columns are almost identical. Every single benefit paid to people under pension age is unchanged.

In other words all benefits – with the exceptions below – are frozen. No rise at all in April. Zero. Zip. Zilch.

There are two reasons for that. One group of benefits such as jobseeker’s allowance, income support, and child benefit are unchanged because the Chancellor announced in his Summer Budget that they would be frozen for four years saving £4 billion a year by 2019/20. The rest, such as disability living allowance, carer’s allowance, maternity allowance, and widow’s benefits, are unchanged because inflation is effectively zero. The September CPI showed a slight fall in prices of -0.1% and negative inflation counts as zero. So between these two rules all working age benefits are frozen. Children, disability, illness, widowhood, caring , unemployment - none of those merit even a 1p a week rise.

Pensioners gain
How different it is when we come to that magic word ‘pensioner’. People over the age of 63 – when women will be entitled to state pension from April – will generally find they get more from April.

Their benefits and allowances will rise. The basic state pension will go up by the rise in earnings of 2.9% from £115.95 to £119.30, an extra £3.35 a week. But, and it is quite a big but for some, all the extras paid with the state pension – SERPS, State Second Pension, extra for deferring or paying Class 3A contributions, and graduated pension – will all be frozen. A point not mentioned by the Chancellor in his Autumn Statement speech.

The full rate of the new State Pension was fixed, as predicted here a while ago, at £155.65 a week, though for transitional reasons most new pensioners will get less than that rate in the first years of the new state pension. Many will get what they would have had under the old system or a little more, especially women. Click for the full story of women doing worse than men from the new state pension.

Pension Credit for the poorest pensioners will also rise by 2.9% - up by £4.40 from £151.20 a week to £155.60 for a single person and up £6.70 for a couple from £230.85 £237.55. That will benefit 1.1m people. But most of that rise will be clawed back from the 1.4m who are slightly above the poorest level who get savings credit as well. That will leave them with only about £2.02 a week out of the £3.35 of the state pension rise. The figure for couples is keeping £3.21 from an extra £5.35. Overall the maximum income to get any pension credit is frozen at £188 single and £274 couple.

Housing benefit which helps pay for rent distinguishes between those under and over state pension age. No rise for those under - single, couple, disabled, children - all frozen. But there is a rise of 2.9% for those over pension age and even higher amounts for those over 65. Pensioners are not subject to the hated bedroom tax either.

The same rises will be found in local council tax support schemes where older people are fully protected against the cuts imposed on working age people.

Winter Fuel Payment is frozen again as expected.

But the few niggles about minor items not changed cannot hide the fact that the big social security winners are older people. As the Chancellor made clear in his speech

“The first objective of this Spending Review is to give unprecedented support to health, social care, and our pensioners.”
Perhaps that is why he gave these fifteen pages of bad news on benefits for everyone else to the Pensions Minister to quietly slip out in the House of Lords on a Thursday afternoon.

29 November 2015
Version 1.00

Friday, 27 November 2015


Stamp Duty Land Tax (SDLT) will be charged at a higher rate from April on any home you buy that is not the home you live in.

The rates charged on each band will be

£1 to £125,000
£125,001 to £250,000
£250,001 to £925,000
£925,001 to £1,500,000
Above £1,500,000

SDLT1 is the tax on the home where you live
SDLT2 is the tax on an additional home 

There are some properties that are exempt including caravans, mobile homes (probably including park homes), and houseboats. Homes sold for £40,000 or less are also exempt. But for homes over that price the 3% band applies to the first £125,000 - there is no exempt band. Here are some examples.

SDLT2 will apply to a home which is bought but which you do not immediately live in as your main residence. So if you purchase a buy-to-let property or a second home for holidays or weekends then SDLT2 will apply. 

If you buy a home to live in but for some reason cannot or do not sell your previous residence at the same time, SDLT2 will be charged. If you sell the original residence within 18 months the extra tax - the difference between SDLT2 and SDLT1 - can be refunded by HMRC. This rule and timetable applies even if the new purchase is not fit for human habitation and has to be done up to live in. But it does not apply if the property purchased is not a residential property at the time you buy it - for example a garage or a church or an industrial unit.

Someone who owns a home they live in and also owns a second home - a holiday home or weekend retreat for example or a property they rent out - will not pay SDLT2 if they sell the home they live in and buy another which they then live in. But they will be liable to SDLT2 if they sell their holiday home or rented property and buy another. If they buy a third property it will always be subject to SDLT2. So they will be liable to SDLT2 if they buy another home to live in, move into it, but do not sell the home they left. It is not clear if the 18 month rule will apply to them. 

The home you live in is a matter of fact. It is not like Principle Private Residence for Capital Gains Tax where you can nominate a property to be your PPR. Nor is it decided simply on days of occupation. It is a matter of fact - where your bills are paid, where your work is, where your children go to school etc. 

Couples who are joint owners of the home they share will pay SDLT2 if they buy a second property and keep the first. But if one of them wholly owns the home they share the rules are different depending if they are married/civil partnered or not. If they are not married/CP'd then the partner who is not an owner of the home they live in can buy a separate home without paying SDLT2. But if they are married/CP'd then they will pay SDLT2 on a separate home they buy. 

SDLT2 applies from 1 April. Completion must happen on or before 31 March 2016 to avoid it. The one exception is if contracts were exchanged before 25 November (Autumn Statement day) but completion is after 31 March then SDLT2 will not apply. That will almost exclusively apply to property that was bought off-plan. 

From 1 April purchasers will have to fill in a declaration that they do or do not own another home. The conveyancer or solicitor will use that to decide which rate of SDLT applies.

SDLT does not apply in Scotland which has its own property tax called Land & Buildings Transaction Tax. At the moment it does not have separate rates for second homes. A statement on 16 December will set the rates of the devolved taxes - including LBTT - for next tax year.

So someone living in England who bought a second home in Scotland would not pay extra tax on the purchase. So an Englishman's second home is his Scottish castle!

But a Scottish resident who bought a second home in England would pay SDLT2.

SDLT2 will apply equally to people who live outside the UK or, indeed, in Scotland. They will have to fill in the same declaration on property ownership. So a Scottish resident who bought a second home in England would pay SDLT2 on the purchase. As would a resident of Dubai, Germany, or Australia.

Matters for Consultation
Some details have not been finally decided. A consultation Paper is promised 'shortly'. These issues will probably be in it.
  • What will happen if someone who owns a home where they live then buys a second home jointly with someone else? For example a parent helps a child with a property purchase and wants the security of being on the deeds. SDLT2 will probably apply but the details will be consulted on.
  • The intention is that landlords or companies with 15 or more properties will not have to pay SDLT2. But the exact number and details will be subject to consultation.
  • Will there be any concessions for people who have to a separate home for work? That could affect MPs so there may be a concession!
  • What is the definition of the home where you live?
  • What will happen if someone with a second home sells the home they live in to move into another but then does not sell the home they move out of. Will the 18 month rule apply to them?
This blogpost is based on detailed conversations with HM Treasury and reflects HMT's intentions as well as I can understand them. However, the final rules may change after the consultation and all are subject to parliamentary approval. Treat it as a guide and take professional advice before acting on the information contained in it.

27 November 2015
Version 1.10

Monday, 23 November 2015


In the first five years of new state pension between 45,000 and 60,000 new pensioners (2% to 3% of the total) living in the UK will get no state pension due to having fewer than ten years of National Insurance Contributions. 

In addition to those living in the UK, a further 30,000 to 40,000 people living overseas who reach state pension age in the first five years of the new State Pension will be caught by this rule and get no state pension. That is about one in five UK overseas residents who reach state pension age in that time.

Under current rules people in the UK or abroad who have paid at least one year of National Insurance and who reached state pension age from 6 April 2010 get 1/30th of the basic state pension for each year paid, which is around £200 a year.

By 2040 it is estimated this new rule, which will deprive up to 20,000 people a year of any pension, will be saving the Government £650m a year.

It is reasonable to suppose that the majority of those who get no pension will be women. They will suffer twice as under new State Pension rules they will not be entitled to a reduced pension on their spouse's contributions. Under the current rules they could claim £69.50 a week on their spouse's contributions if their own entitlement was less than that amount.

These figures from the May 2014 Impact Assessment (para.95) are approximate. No breakdown into men and women is available and the Government has refused a Freedom of Information request for them - see below. I have asked for a review of that decision. 

Thursday, 19 November 2015


Millions of women had their state pension age delayed - in some cases twice and by up to six years in total - without proper notice.

That is the only conclusion to be drawn from the details of how they were informed of the changes which has now been obtained from the Department for Work and Pensions. It reveals
  • The Government did not write to any woman affected by the rise in pension ages for nearly 14 years after the law was passed in 1995.
  • More than one million women born between 6 April 1950 and 5 April 1953 were told at age 58 or 59 that their pension age was rising from 60, in some cases to 63 
  • More than half a million women born 6 April 1953 to 5 April 1955 were told between the ages of 57 and nearly 59 that their state pension age would be rising to between 63 and 66.
  • Some women were told at just 57½ that their pension age would rise from 60 to 66. 
  • Women were given five years less notice than men about the rise in pension age to 66
  • The Government now says that in future anyone affected by a rise in state pension age must have ten years' notice. None of these women had that much notice nor did the men affected by the change.
Rising age
The first increase in women's state pension age was introduced by the Pensions Act 1995. The change would not start until April 2010 and would take ten years to complete. By 6 April 2020 women's state pension age would have been 65 and equal to that of men.

There was little mention of this momentous change at the time - perhaps because the process would not start for 15 years and it would be 25 years before women had the same state pension age as men. A press cutting search of the 1990s found very few mentions of the pension age increase and those were almost exclusively in the business and money pages of broadsheet newspapers.

The women affected were then aged 40 to 45. It is understandable that many of them, even if they read the newspapers, would have put it in the 'too far away to worry about' box.

In newly obtained Freedom of Information answers the DWP claims that it placed "advertorials" in women's and TV listings magazines in 2000. It also claimed there was a press advert "specifically about the equalisation of state pension women's magazines and national newspaper supplements". But when asked for details of these adverts the DWP refused to do so. It admitted it "may hold" this information but finding it would cost more than £600 so it was entitled not to provide it. It also says the change was mentioned in some leaflets produced in the early 2000s.

But its crucial and damning admission is that it did not write a letter about the change to any woman affected for nearly 14 years after the Act was passed.

Writing a letter is not of course the same as informing people. The DWP admits that it could only write "using the address details recorded by HMRC at the time" and that the mailing was "subject to the accuracy of their address details with HMRC". Even those which did reach the correct destination may not have been read - "more bumph from the government" is a common reaction to such things.

Many women involved in the campaign group Women Against State Pension Inequality (WASPI) have told me they have never received a letter about changes to their state pension age even now. Many found out from friends relatives, work colleagues, or the media. Many learned about it through Facebook or Twitter.

One reason for that may be revealed in a new global study of data quality expected to be published shortly. I have been told by sources close to the report that 23% of customer or prospect data - including names and addresses - contains errors. That does not mean that nearly a quarter will not arrive. But it does show that sending one letter is the beginning of informing people not the end.

Detailed dates
Information released through Freedom of Information requests by WASPI reveals that it waited fourteen years after the law was passed, until April 2009, before it began writing individually to the women affected. 

The first group were 1.2 million women born between 6 April 1950 and 5 April 1953. These women expected to reach state pension age at 60 between 6 April 2010 and 5 April 2013 and were written to in turn by date between April 2009 and March 2011. The DWP figures show that the letters were sent to women when they were 58 or in some cases 59 to tell them their pension age of 60 had been delayed. On average they were given one year and five months notice before they reached their expected state pension age of 60. Some had less than one year's notice; none had more than two.

The letter writing was stopped in March 2011 because the Coalition government was considering speeding up the equalisation of state pension age. Those changes, in the Pensions Act 2011, were finally passed by Parliament on 3 November 2011. The letter writing began again in January 2012.

Second wave
The group affected by the speed up - women born from 6 April 1953 - had not been written to as part of the first wave of letters. They were now included in a second "mailing to individuals...due to reach State Pension Age between 2016 and 2026 [which] was completed between January 2012 and November 2013".

Approximately 650,000 women worst affected by the speed up - those born 6 April 1953 to 5 April 1955 - were written to in January and February 2012.

That means they got their letters between the ages of 57 and almost 59 that their pension age would not be 60. In many cases that would have been the first they knew about the original change and they were now told that their state pension age was to be raised again to just over 63 years and in some cases to as much as 66.

Some of these women, of course, may have discovered themselves that their pension age had already been extended once. For them the letters sent in 2012 arrived only between four and eight years before that revised pension date. It told them that their state pension age was to be extended further by between two and eighteen months.

Worst affected
The very worst affected were the 300,000 women born between 6 December 1953 and 5 October 1954 who faced that maximum extra 18 month rise in their state pension age. We know now that they were first written to about the changes between the ages of 57 years 5 months and 58 years 1 month before they reached 60, giving them just 22 to 30 months to rearrange their lives.

Among that group too some had worked out that their state pension age had already been raised once. They were told between five and half and seven years before their state pension date that a further change would push it another 18 months into the future - in all cases to beyond 65 and for some as late as 66.

It is important not to forget another group who got very little notice that their state pension age would be 66. They are the women born from 6 October 1954 to 5 April 1959. Most of these women only heard about the changes at the age of 56 or 57, two or three years before they expected to reach state pension age at 60. Even the very youngest got no more than five years' notice.

The WASPI campaign covers all women affected including those born up to the end of 1959. It is seeking transitional compensation for the whole group.

Men were also affected by the Pensions Act 2011 which raised their traditional state pension age of 65 to 66. Those born 6 December 1953 to 5 April 1955 were written to in February 2012 when they were 57 or 58, giving them between six years nine months and seven years seven months notice before their 65th birthday. They were informed of a delay of up to one year in their pension age.

DWP wrote to people born 6/12/53 to 5/4/59 about their state pension age rising. Women were told on average 2 years 7 months before expected pension age of 60; men were told on average 7 years 6 months before their expected pension age of 65.

Notice now
The Government's latest plan for reviewing and increasing state pension age was published in December 2013. It set out the principle that people should spend no more than a third of their life adult life (measured from age 20) on the state pension. A review would be held once every five years to work out what state pension age should be. It also promised "The review will seek to give individuals affected by changes to their State Pension age at least ten years’ notice."

None of the individuals mentioned in this blogpost have had ten years' notice. Some have had less than one year. None has had more than eight for the second delay.

The WASPI campaign wants some transitional protection for the women who are the worst affected. Its petition has gathered more than 38,000 signatures. At 10,000 signatures the Government must respond. It said it "will not be revisiting the State Pension age arrangements for women affected" after rather disingenuously claiming that "All women affected have been directly contacted following the changes."

The call for some transitional protection was specifically ruled out by Pensions Minister Baroness Altmann on Money Box on 26 September 2015.

WASPI claims that if the MPs who voted in 2011 for the further rise in state pension age had known they were given such short and inadequate notice of the 1995 changes they may well have voted differently. The Bill was passed by 287 to 242 votes after amendments about the changes were rejected by 291 to 244 votes.

The petition needs 100,000 signatures before it will be considered for a debate in Parliament.

The DWP failed to inform millions of women about the changes to their state pension age until a year or two before they were 60. It gave inadequate notice to those affected by the further extension of their pension age leaving it to between four and eight years before that further rise was implemented. In many cases those women did not know then that their pension age age had been increased once already.

More information 
WASPI on Facebook
The WASPI petition
WASPI on Twitter
Pensions Minister Baroness Altmann on Money Box
Pensions Minister responds to Baroness Bakewell in House of Lords
Official site to calculate your state pension age

Sources: DWP Freedom of information VTR3902 (5 October 2015); VTR 3439 (8 September 2015); VTR3231 (17 August 2015).

29 November 2015
version 1.3

Monday, 16 November 2015


Please use this version not versions below 1.50 as noted at the bottom of the document.

National Insurance contributions will be going up by an average of 15% for around six million people in April. The lower the earnings the bigger the percentage rise. Technically this does not break the Government’s election pledge – made four times in the Conservative Party Manifesto 2015 – that “we will not raise VAT, National Insurance contributions or Income Tax”. The Treasury told me that the pledge only applied to main tax and National Insurance rates and in any case this increase had been announced by the previous government and so was outside the pledge.

The rise is part of the introduction of the new State Pension. From 6 April new contributions to State Second Pension (S2P or as it used to be called SERPS) will end. So no one will be able to ‘contract out’ of S2P in favour of their own pension at work. Until April those who do contract out of S2P get a rebate of 1.4% off their National Insurance contributions (NICs) bringing them down generally from 12% to 10.6%. (NB the exact calculation is complicated - see Note for Nerds below). When S2P disappears in April so will the rebate. 

The people affected all pay into a final salary (or career average) pension – nowadays called ‘defined benefit’ or DB schemes. These have been cut back by employers in recent years and around one million workers employed by around 2500 private sector firms pay into one. About 5 million do so in the public sector.

How much?
The rebate is 1.4% of a band of earnings between £112 and £770 and when it ends someone on average earnings of £25,000 will pay an extra £5.16 a week in NICs. That will put up their net weekly contributions from £33.93 to £39.09 an increase of 15.2%. Someone on minimum wage will see their NICs rise from £11.38 a week to £13.56 – an increase of £2.18 or 19.2%. The £2.18 extra NI will take them 20 minutes to earn.

The change will wipe out the 1% pay rise scheduled for many of the 4.5 million public sector workers from April. Anyone with current gross pay of £22,436 or more will end up worse off. For example, someone paid £30,000 a year will get a pay rise of £300. They will gain from the change in the personal tax allowance leaving them paying £20 less tax in the year. But the extra £36 NI on their pay rise and the loss of the £374.46 contracted out rebate will leave them £54.46 a year worse off despite the pay rise. That is a cut in their net pay of 0.23%.

Someone earning £15,000 gross will get a pay rise of £150 a year and pay £50 less tax. But the NI rebate loss and their higher pay will see NI contributions rise by £146.46. So they will keep just £53.54 of their £150 pay rise. That is a rise in their net pay of just 0.4%.

The biggest loss is for someone earning £40,040 a year. They will get a pay rise of £400.40 but will end up £126.68 worse off - a cut of 0.41% in their net pay.

These calculations do not take account of pension contributions or any changes which may be due in them from April.  Nor do they take any account of benefits or tax credits.

Will it change?
All these calculations are based on 2015/16 NI rates and thresholds. Normally the lower thresholds go up each year with CPI inflation. As that is around zero there may be no change. If there is that will alter the figures slightly but the general principle remains – National Insurance for 5.5 million people is going up in April by an average of 15% compared with what it would have been if the new scheme had not been introduced.

Employers too
The change will not just affect employees. It will also mean higher NI payments by employers who have a contracted out salary related pension scheme. The rebate is currently 3.4% off a standard 13.8% rate. That will end from 6 April and employers will face a rise in the NI they pay on average salaries of more than one third. Private sector employers can make changes in the pension scheme to recoup the cost of the rise in NI contributions by reducing scheme benefits or increasing employee contributions. They can do that without consulting scheme trustees using what is called a 'statutory override'. To find out more search that term in Google. Some have already said they will do that.

Public sector employers however must bear the cost. The Treasury estimates (p.64 line 18 in table 2.1) it will add £3.3 billion in 2016/17 to the pay bill of the whole public sector. The NHS Confederation in particular expects the NHS in England and Wales to face £1.1 billion a year in extra expenditure. The Local Government Association estimated the change would costs local authorities in the Local Government Pension Scheme an extra £700 million a year. 

The Government says that the rise will be more than paid for by the higher rate of state pension which is earned. Every year of National Insurance which is paid will earn an expected £4.44 a week in new State Pension compared with £3.97 a week under the old (current) system. But even that is only true until the full new state pension is reached, normally after 35 years contributing under the new system. After that there could be another 15 years or more paying National Insurance and gaining nothing. In that sense NI is just a tax on earned income. And for 5.5 million it is going up in April.

Note for nerds
The main standard rate of National insurance is paid on a band of earnings from £155 to £815 a week. But the contracted out rebate of 1.4% is calculated on a different band from £112 to £770 a week. Don’t ask! That complicates the calculation of the effects. The figures in versions of this blogpost lower than 1.50 understate the effect.

A shorter version of this blog was first published in the Money Box newsletter for 23 October 2015. Subscribe to the newsletter.

21 November 2015
version 1.6

Monday, 9 November 2015


The great thing about déjà vu is that if you wait a year or two it happens again.

The FCA wants a 'shopping around point' to make sure that customers are not sold poor value drawdown schemes when they exercise their pension freedom. 

Here are the eleven occasions from 2001 to 2014 that the Association of British Insurers promoted 'shopping around' to ensure people got a better annuity deal. They all failed.
  1. 8 August 2001 ABI Code of good practice on pension maturities. Tell customers they can shop around.
  2. January 2006 ABI issues a revised statement of good practice on pension maturities. Tell customers more clearly they can shop around.
  3. 10 July 2008 Improved customer information “highlights the potential benefit of shopping around”.
  4. 26 May 2009 ABI guide: People Need Pensions. Includes information on the importance of shopping around.
  5. 17 January 2011 ABI publishes a new guide – to help customers shop around.
  6. 20 December 2011 Consultation on providing a statement on benefits of shopping around.
  7. 7 November 2012 Consultation on annuity rate transparency to help people shop around.
  8. 5 February 2013 – ABI publishes – a guide to shopping around for retirement income
  9. 1 March 2013 – Code of Conduct on retirement Choices includes publishing the information people need to shop around.
  10. 21 August 2013 – publishes specimen annuity rates to give some idea of the benefits of shopping around.
  11. 10 March 2014 – ABI Minimum standards including A Conversation, A Comparison of quotes, Health and lifestyle information – oh and shopping around.
The regulator was no better. More than a decade spent relying on customers shopping around to do its job for it. 

  • August 2001 FSA Buying a pension annuity disclosure must say “by shopping around policyholders may get a better deal."
Twelve and a half years later
  • 1 February 2014 FCA Thematic Review of AnnuitiesChapter 2 The benefits of shopping around.
These plans were all put out after evidence revealed - if you can reveal the same thing a dozen times - that people were getting the wrong annuities and, guess what, they were the most profitable ones for the firms that allowed customers to drift into buying them.

After more than a decade of failure by the pensions industry to avoid widespread mis-selling of inappropriate annuities, George Osborne cut through the Gordian knot and announced pension freedoms in his March 2014 Budget. That happened just after the latest doomed attempts to promote that empty journalistic trope 'shopping around'.

Instead of innovation, the industry has just replaced expensive annuities with drawdown which comes with no guarantees and is often even more expensive.

So instead of mis-selling of annuities we have blanket 'non-advised' selling of expensive drawdown products.

And now the regulator wants 'a shopping around point' to solve the problem of expensive drawdown, as this report shows 

'Speaking at the Westminster Employment Forum in London last week, FCA director of competition Mary Starks said: “We’re very conscious that if we see a significant increase in  people not moving around in retirement, and in buying drawdown from existing providers we will have to look very hard at how we can make comparisons easier and step in to break the link between the provider and the retirement phase by prompting a shopping around point.”' (Money Marketing 9 November 2015)

Wow. A shopping around point. Something that didn't work in 2001 (twice), 2006, 2008, 2009, 2011 (twice), 2012, 2013 (thrice), or 2014 (twice). Now retrod for 2015 by the regulator. The financial firms will earnestly agree and nod wisely while they grin from ear to ear.

This time it is not a mis-selling scandal but a mis-buying one as financial firms carefully distance themselves from offering anyone advice. 

So ultimately those exploited will be blamed. And the pensions industry will be left alone to count its profits.

9 November 2015
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Up to four million married couples and civil partners are missing out on a new tax allowance that is worth £212 this year. 

The Marriage Allowance was announced in the 2013 Autumn Statement and allows a spouse (or civil partner) to transfer up to £1060 of their 2015/16 tax allowance to their partner if (a) their income is below the tax threshold (currently £10,600 a year) and (b) their spouse does not pay higher rate tax which begins on incomes above £42,385 a year. Both must also be born after 5 April 1935 because older couples get a bigger tax break - see Marriage Tax Breaks.

When the policy was announced the Government said that 4.2 million couples would be eligible. However, estimates of the cost of the allowance by the Treasury indicate that it expected only around 2.5 million to claim it in 2015/16 rising to no more than 3.25 million by 2017/18. 

But even those numbers have now been shown to be hopelessly optimistic.

HMRC figures given to Oliver Letwin MP in September show that only 165,000 had actually got the allowance. A similar number were said to be in the process of applying for it. Even if all their claims are successfully made by April that will still leave nearly four million couples without it and the Treasury saving £400 million off the expected cost of the measure this year and £890 million off the cost if everyone entitled claimed.

My requests to HMRC for more up to date figures have been refused. "We are not saying very much...
any figures we release...won’t be representative of the level of demand"

How it works
If a couple qualifies then the non-taxpayer can transfer £1060 of their unused personal allowance to their spouse. That will save the taxpaying spouse basic rate tax on that amount which is £212 a year (£17.66 a month or £4 a week).

The transfer can only be for the full amount of £1060. That can be done even if the person transferring the amount has an income close to their personal tax allowance. So someone with an income of £10,000 who is a non-taxpayer can transfer the full £1060 leaving themselves with a personal allowance of £10,600-£1060=£9540. So they will start being a taxpayer and pay basic rate tax on £10,000-£9540=£460 ie a tax bill of £92. Their spouse will save £212 leaving the couple £120 better off.

The future
In future years the Marriage Allowance will rise. It is fixed at 10% of the personal tax allowance. So on present plans it will be £1100 in 2016/17, £1120 in 2017/18, and £1250 by 2020/21.

Claiming and payment
You can claim the allowance online or through the income tax helpline 0300 200 3300. You will need National Insurance numbers and dates of birth for you and your spouse. Lines are open 0800-2000 Mon-Fri or 0800-1600 Saturday. You can also claim by sending a letter with your details to Pay As You Earn, HM Revenue and Customs, BX9 1AS. That might take longer.

Once the transfer is done the spouse receiving the extra allowance will have a suffix M added to their tax code and the code will be 106 higher, representing the full £1060 transferred. The one making the transfer will have a suffix N and their tax code will be 106 lower. 

It will be backdated to the start of the tax year and then reflected in a reduced amount of tax each month. 

HMRC says that the process is now simple and quick and that is confirmed by many on my twitter timeline who have got the allowance. 

The Marriage Allowance is only available to married couples and civil partners. It is not available to other couples.

More in Marriage Tax Breaks including allowances for older couples and blind people.

9 November 2015
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