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Tax year 2015-16 has seen a change which could save some basic-rate taxpayers more than £200. JODIE STREET explains how the Married Couples Transferable Allowance works.

The essential idea behind the Married Couples Transferable Allowance (Marriage Allowance), introduced in the 2014 Budget, is pretty straightforward. Where one spouse is a basic-rate taxpayer and the other is not using their personal allowance in full, up to £1,060 of their personal allowance can be transferred between the two. This can result in a potential tax saving of about £210.

When we look at the detail, it’s a little more complex, of course.

First of all, as you would expect, people applying for the transfer must be married couples or civil partners, who are basic-rate taxpayers or not using their personal allowance. They must be born after 1935. If not, the Married Couples Allowance would apply. Normally, they must be UK residents too. 

There are, however, groups of transferors who are entitled to a personal allowance for a reason other than being a UK resident. (These include being a national of an EEA state, a resident of the Isle of Man or the Channel Islands, someone who has been employed in the service of the Crown and various other categories.) In such cases, their income must be taxed at the basic rate using the hypothetical net income calculation.

How is this calculated? We assume they were UK resident for the full tax year concerned and were domiciled here in that period (worldwide income and gains included). We also assume that they weren’t deemed non-resident by a double tax treaty and that they have made any available claim for double tax relief on income and gains. If their income isn’t in sterling, it’s calculated using the average exchange rate for the year.

Getting the timing right

The couple involved in the transfer must be married for the full year or part of the tax year, as well as at the time of election. The transferor must elect for the transfer within four years of the end of the tax year concerned. 

If the election is made in the tax year to which it relates, it continues for as long as the qualifying conditions are met, unless it is withdrawn or the couple divorce. If the election occurs out of the relevant tax year, on the other hand, it only affects that year and the individual must apply separately for other years.

Remember, you are only entitled to one allowance per year, even if you are married twice to separate spouses in that period! If you do have more than one spouse, you can only give the allowance to one of them.

You can register your interest by visiting https://www.gov.uk/marriage-allowance and HMRC will then invite you to apply via an email link. It’s the person who is transferring their personal allowance who must apply. You will need your NI number, as well as that of your partner, and must be able to prove your identity online. Even if you make the application during the course of the year, it will apply to the whole of 2015-16.

A faster, better DNG App is born

Download the DNG App (or update your existing one) today and discover significant improvements throughout the App. Hundreds of amendments and improvements have been made – here are just a few of the more obvious ones you can enjoy: New platform means the DNG App is much, much faster

• Increased ease of navigation 

• Calculators updated and layouts improved

• GPS mileage tracker quicker with improved reliability 

• Improved photo receipt manager to log your expenses ‘on the go’ faster than ever with auto-populating VAT, receipt date and a ‘My Settings’ feature added

• Income tracker added 

Download it today here:

For Iphones/Ipads via the App Store on Itunes

For Android devices via Google Play

We hope you enjoy the improvements – feel free to pass the App around your friends and colleagues with our compliments.

Free up your time with professional, strategic support.

Many professional services firms – including accountants – employ a ‘practice manager’ to oversee and co-ordinate their work. Plenty of companies in other sectors could benefit from exactly the same kind of approach.

An increasing number of accountancy and legal firms now employ a Practice Manager to look after the day-to-day running of their business. It’s a recognition that it’s very difficult to focus on the priorities of clients and to deliver a seamless service, unless you have someone working behind the scenes to make sure that everything is running efficiently. 

In simple terms, the Practice or Operations Manager makes sure that whatever the business and its clients need, the structures and processes are in place to make it happen. This could involve anything from recruitment of staff through to creation of a robust IT infrastructure, management of front-of-house reception and the preparation of disaster recovery plans.

The sheer importance and variety of the role makes it highly strategic. How do we respond to regulatory requirements, for instance? What is our tolerance level for risk? And how can we make sure we manage our finance, insurance and facilities in the most effective way possible?

If you’re choosing a manager to oversee operations in your own business, my recommendation would be that they are an inquisitive person. Someone who looks at numbers and is able to see the underlying trends behind them. The chances are that they may come from an accountancy background and will have real attention to detail, along with an almost instinctive ability to spot opportunities to reduce costs.

Remember, if you’re working too much in the business, you’re not working enough on the business. It’s a scenario which is repeated across many growing firms. Eventually, this is likely to translate into poor profitability and low cashflow. That’s why an investment in an operations manager can make sense for any expanding company.

Is there a magic threshold or size at which you decide to act? Not necessarily. One company with a £2m turnover might be very different from another. I would make your judgement on the basis of the complexity of your business. Once the demands of running the firm efficiently are starting to undermine your ability to focus on your core role, then it might be the ideal moment to find someone who can take a lot of the burden off your hands.

Start planning for the future with your accountant

Accountants do a lot more than simply crunch numbers. They can be trusted partners who’ll help you draw up a compelling business plan.

In the past, business planning was not an essential part of life. The small businesses we dealt with didn’t recognise the importance of looking forward and planning for the development of their company. 

Times have changed and, today, business planning is very much an essential part of corporate life. Why the transition? Well, the most common reason to prepare a plan is to explain your business priorities, capabilities and ambitions to an external lender, such as a bank. In an era of reduced access to finance and the application of rigorous lending criteria, a professional approach is absolutely essential. 

A business plan is, however, important at other levels too. It is an essential business management tool which provides a structure and guidelines for the running of your business.

From our point of view as professional advisors, assisting clients with the preparation of their plans is an ideal way of developing a close relationship with them and their staff.

The preparation of a business plan naturally involves financial information, but it also enables us as accountants to show that we are business advisors with commercial awareness, rather than simply number crunchers. A well-written plan will get behind the numbers. It will include comments on the aims and objectives of the business, as well as the personal ambitions of the owners. We will make reference to the key people in the organisation, the state of the company’s assets and planned capital expenditure.

A good plan will include observations on marketing strategies and risk management – the latter being an essential part of today’s business life. Working with clients to produce a business plan is therefore a highly rewarding and fulfilling exercise. It is also an excellent way to demonstrate how chartered accountants are trusted business partners for their clients.