Marriage Allowance is booked on the recipient as the transferor's unused allowance, not the fixed s.55B transfer #1947

Problem

The model books Marriage Allowance on the recipient as the transferor's unused personal allowance. By law the recipient gets a fixed reduction and the transferor's own allowance falls.

• marriage_allowance.py:36-46: the recipient's amount is min(partners_unused_personal_allowance, 10% of PA), rounded up to £10.
• earned_taxable_income_exclusions.yaml: that amount comes off the recipient's non-savings taxable income, not as a Step 6 tax reduction.
• personal_allowance.py: nothing reduces the transferor's allowance.

So the transferor's income moves the recipient's tax. That matters beyond income tax. Universal Credit deducts a person's own tax on their earnings (reg. 55(5)(b)), so in #1942's fix a pensioner's State Pension changes the earning partner's UC earned income.

Law (legislation.gov.uk, read 2026-09-30, version valid from 2026-09-16)

ITA 2007 s. 55B (https://www.legislation.gov.uk/ukpga/2007/3/section/55B):

(1) An individual is entitled to a tax reduction for a tax year of the appropriate percentage of the transferable amount if the conditions in subsection (2) are met.

(4) ... (b) for the tax year 2016-17 and subsequent tax years, is 10% of the amount of personal allowance specified in section 35(1) for the tax year to which the reduction relates.

(5) If the transferable amount calculated in accordance with subsection (4)(b) would otherwise not be a multiple of £10, it is to be rounded up to the nearest amount which is a multiple of £10.

(6) If an individual is entitled to a tax reduction under subsection (1) by reference to an election under section 55C, the personal allowance to which the relinquishing spouse or civil partner is entitled under section 35 ... is reduced for the tax year by the transferable amount.

ITA 2007 s. 55A(2): "A tax reduction under this Chapter is given effect at Step 6 of the calculation in section 23." s. 29(2): "A tax reduction may be deducted at Step 6 only so far as there is sufficient tax calculated at Step 5".

ITA 2007 s. 55C(1)(c): a UK-resident transferor can elect if, "assuming the individual's personal allowance was reduced as set out in section 55B(6), the individual would not for that year be liable to tax at a rate other than the basic rate" (or the other listed basic, nil and starting rates). They do not need income below the allowance.

So the transferable amount is a fixed £1,260 (2026-27). The recipient's reduction is 20% × £1,260 = £252, capped at their Step 5 tax, and the transferor's allowance falls by £1,260.

Worked example (2026-27)

The recipient earns £30,000 and the transferor earns £12,000, earnings only.

The couple's total is right, but £138 of tax sits on the wrong partner. Per-person outputs are wrong wherever the transferor's income is between £11,310 and £12,570.

Other departures (2026; items 1-3 and 5 from Simulation(situation=...) runs, items 4 and 6 from the code)

1. Savings-income transferor. A transferor whose income is interest can stay at the 0% starting rate for savings after the transfer, but the model gives them no unused allowance. The recipient is on £30,000 of earnings:
   • transferor with £15,000 of interest: the model's recipient tax is £3,486 against £3,234 in law;
   • transferor with £12,000 of interest: £3,372 against £3,234.
2. Recipient taxed mostly on dividends or savings. The relief comes off earned taxable income, floored at 0, so it can be lost. A recipient with £12,570 of earnings and £5,000 of dividends pays £483.75 with or without Marriage Allowance in the model; the law gives £231.75.
3. Scotland. The relief is worth the recipient's marginal rate, not the Scottish basic rate (s. 55B(3)). An intermediate-rate recipient saves £264.60 in the model and £252 in law.
4. Rounding. The partial unused amount is rounded up to £10, which s. 55B(5) does not provide for.
5. Double counting. When both partners are below the allowance, both get marriage_allowance = £1,260. There is no effect on tax, but it inflates any total of the variable.
6. Married couple's allowance. It is not checked (s. 55B(2)(d)).

Effect on Universal Credit

test_state_pension_does_not_change_partners_marriage_allowance in policyengine_uk/tests/test_uc_state_pension_properties.py is a strict xfail that pins this. The setup is 2026, a pensioner aged 70 and a partner aged 45 earning £20,000, with council rent of £20,000.

• Law: the partner's tax on earnings is £1,486 − £252 = £1,234 whatever the pensioner's State Pension. So £12,000 of State Pension gives UC of £6,009.26.
• Model: that State Pension leaves £570 of unused allowance, so the partner's tax on earnings is £1,372 and UC is £6,085.16.

The property tests that ask for pound-for-pound State Pension switch Marriage Allowance off until this is fixed.

Fix sketch

• Model the election on the transferor: a transferable amount of 10% of PA, rounded up to £10, which cuts the transferor's personal allowance.
• Give the recipient a Step 6 reduction of the basic rate (or the Scottish/Welsh basic rate) × that amount, capped at their Step 5 tax.
• Keep the take-up draw, but on the couple's election. Rational take-up can compare the couple's tax with and without the election.
• Mirror it in rulespec-uk (ITA 2007 ss. 55A-55E).