ATXP6 UK
Syllabus A1. Income tax A1a. The comprehensive computation of taxable income and income tax liability

# A1a. Transferable Personal Allowance

### Syllabus A1a)

B5 The comprehensive computation of taxable income and the income tax liability

### What is a transferable P.A.?

#### For an unused personal allowance to be transferrable between spouses/civil partners:

One individual must be a non-taxpayer and have unused P.A.

The other individual must be a basic rate tax payer.

• The maximum amount that can be transferred from the non taxpaying spouse is: £1,190

• (This must be available to the non-taxpayer to actually transfer)

• This transfer will be given in the form of a 20% tax credit to the spouse who is taking it: 20% * (£1,190) = £238 is the maximum tax credit that can be given to the spouse who is paying tax.

• Thus, this amount will be deducted from their income tax liability to reduce their income tax payable.

The election to transfer must be made within 4 years of the end of the tax year to which it should apply, and remains automatically effective until it is withdrawn.

#### Illustration:

A husband has trading income of £30,000. His wife only has employment income of £8,000.

• Does she have unused personal allowance?

• How much of her unused personal allowance can she transfer to her husband?

• How will this reduce his income tax payable?

#### Solution:

Wife
Employment income £8,000
Personal allowance  (11,850)
Taxable income Nil
Unused P.A. = £3,850 – the maximum that can be transferred is £1,190.
Husband