Marriage Allowance

polymaff

Stop objecting and try to work this one through:


Partner 1: taxable non-savings income £8,000; UK dividends £32,000


Partner 2: taxable non-savings income £24,000


Partner 1 - the higher income, tax-paying, partner - elects for MAT.

Consumerist

Thank you for such a wonderfully clear explanation of your point. I'm sure everyone to whom it might apply understood it perfectly.

zagfles

Consumerist wrote: »

Thank you for such a wonderfully clear explanation of your point. I'm sure everyone to whom it might apply understood it perfectly.

On the off chance they didn't - I think it's that Partner 1 would have their allowance lowered by £1190 resulting in paying extra dividend tax on £1190, at 7.5%, costing £89.25. Partner 2 would gain £1190 * 0.2 = £238. Net gain £148.75.

Am I right in thinking that if both partners has earnings similar to partner 1, then either could transfer to the other and they'd gain?

Dazed_and_confused

Am I right in thinking that if both partners has earnings similar to partner 1, then either could transfer to the other and they'd gain?

Is there anything to prevent both partners applying?

Then they would both be liable to pay £89.25 more in dividend tax but each would also receive a reduction of £238 off their overall tax bill.

Or am I talking nonsense!

polymaff

zagfles wrote: »

On the off chance they didn't - I think it's that Partner 1 would have their allowance lowered by £1190 resulting in paying extra dividend tax on £1190, at 7.5%, costing £89.25. Partner 2 would gain £1190 * 0.2 = £238. Net gain £148.75.

You've got the idea.

MAT is far from elementary - hence the need to avoid the facile nonsense some - including those in HMRC - spout about it.

zagfles wrote: »

Am I right in thinking that if both partners has earnings similar to partner 1, then either could transfer to the other and they'd gain?

Yes. I constructed this minimal case to make it clear how wrong the previous advice was, but, yes, with the current implementation of MAT, dividend income makes MAT quite attractive. Maybe even both could apply! I've raised this point here and on professional accounting sites. No sign of anyone trying it out, yet.

Another point about MAT is - why not automate it?

polymaff

Dazed_and_confused wrote: »

Is there anything to prevent both partners applying?!

I can see nothing in the legislation which would stop a double election - and a double application would particularly benefit poor couples with irregular income - i.e. situations where it would only be obvious in retrospect who was the better prospect.

All of this would be covered by an automatic system - plus going to a new, automated, regime would allow HMRC to truly reflect the legislation - something the current, crazy, implementation does not do.

Dazed_and_confused wrote: »

Then they would both be liable to pay £89.25 more in dividend tax but each would also receive a reduction of £238 off their overall tax bill.

In my example, only one has dividend income, so no - but the general point you make is valid - soomeone just needs to be brave enough to set a precedent of a double election.

Beth1101

Hello I applied a few weeks ago for marriage allowance within the week our tax codes changed and got a rebate with husbands wage, I applied for all the years previous aswell, today we had a p800 for 17/18 for a rebate of 228 and log on to claim again we've done this will I get another letter for the previous years or will that be it? Online account still has all years with applied retrospectively

Dazed_and_confused

You would usually only receive something for the previous years if you owe tax (applying for Marriage Allowance will mean you either owe the same tax (often none) as before or you have more to pay).

If you have applied for years prior to 2017:18 then your husband's tax should be recalculated but that doesn't necessarily mean he is owed a refund.

Did he pay some tax in those years?

Did he file Self Assessment returns in those years?

Beth1101

Yes he definitely paid tax, he's always been employed full time earning around 22000 a year, my earnings are around 6000 so would of thought we would have got something back for the previous years.

Beth1101

By we I mean him obviously haha