Marriage Allowance

njb55rtd

United Kingdom


No divs

Dazed_and_confused

Well I think you are still eligible to receive the Marriage Allowance tax credit. Providing you don't move to Scotland during the year and become Scottish resident for tax purposes.

But £1 more income as a UK resident and you wouldn't be eligible.

However. A regular poster on here, polymaff, sees this differently and I think if they respond to this they will say you aren't eligible because of the linterest being taxed at 0% which falls in the higher rate band.

Whereas as I see it that is only an issue if it is dividend income taxed at 0% in the higher rate band.

njb55rtd

Thanks for the quick reply.


Yes, I think there is a difference between
(a) having an actual total income above the basic rate limit

i.e £50500 and


(b) not actually paying higher rate tax.


i.e. the extra £500 is covered by 0%


but I've not really seen a definitive answer.

Dazed_and_confused

Well I think the legislation effectively says you are eligible providing you aren't liable to tax at any of the higher/additional/top rates of tax.

But if you would be liable if it weren't for the dividend nil rate of tax then you are also not eligible.

But polymaff, who will hopefully post in due course, lumps savings income in with the second element meaning in your situation you wouldn't be eligible.

Assuming I have understood their previous comments correctly.

polymaff

Here is an equivalent tax return for 2018-19. Equivalent in having taxable non-savings income equal to the personal allowance plus the basic rate band, £500 of taxable savings income and no dividend income.

You can see from the reported taxable components that the last reports as higher rate.

https://imgur.com/krAp9k8


The legislation states "the individual is not, for the tax year, liable to tax at a rate other than the basic rate, the dividend ordinary rate or the starting rate for savings,"


, so it is down to how HMRC interprets the legislation.

Dazed_and_confused

You can see from the reported taxable components that the last reports as higher rate.

True but I don't think that is relevant for savings interest as the savings higher rate is not being charged, it is still the savings nil rate being charged, albeit in the higher rate band.

There is a good article here which specifically covers this.

https://www.taxadvisermagazine.com/article/marriage-allowance-1

polymaff

Dazed_and_confused wrote: »

True but I don't think that is relevant for savings interest as the savings higher rate is not being charged, it is still the savings nil rate being charged, albeit in the higher rate band.

I've seen nothing in legislation that suggests that nil rates have any effect on banding, or that details any different processing applied to savings and dividend income with respect to banding. Have you?

Let's suppose that the £500 was dividend.would you try to justify:

"but I don't think that is relevant for dividends as the dividend higher rate is not being charged, it is still the dividend nil rate being charged, albeit in the higher rate band"? Not without contradicting the article you quote.

Dazed_and_confused wrote: »

There is a good article here which specifically covers this.

https://www.taxadvisermagazine.com/article/marriage-allowance-1

That article says nothing about taxable savings - so, partial, at best - and irrelevant to the point being debated. Yes?

In the end, it is, perhaps, a question of what HMRC do. For instance, to test out how the case I published the image from would be judged, I attempted to apply for MAT. The SA software immediately flagged an error stating that my taxable income exceeds £11,850 - all in bold, red, type. Good grief !

njb55rtd

I take heart from the following sentence in that article.


"Where a taxpayer has an extended basic rate band, for example as a result of gift aid payments or pension contributions, it is that extended basic rate band that is used to determine whether the taxpayer is a basic rate taxpayer or not and thus whether marriage allowance may be claimed."


and wonder whether the £500 at 0% is one of the examples of having an extended basic rate band, as discussed.

polymaff

Not as far as I am aware. The BRB is specifically extendable in legislation (Income Tax Act) thus:

(3) The basic rate limit is increased in some circumstances: see—
(a) section 414(2) (gift aid relief), and
(b) section 192(4) of FA 2004 (relief for pension contributions).

NB "see", not "e.g." - implying that the list of two is complete ?


- - - - -


I'm coming to the view that nil rate bands, previously (mis?)described as allowances, are best treated in a way similar to MAT's treatment of the beneficiary - i.e. as a credit to the tax account and not something that has any part to play in the, of late, complicated banding of the income.

Mind you, as stated previously, that is not necessarily what HMRC do...

njb55rtd

I thought I'd do an exercise based on 3 scenarios using HMRC's tax return service, based on last year.

1. Pension Income £46350 Savings Income 0
2. Pension Income £46350 Savings Income £500
3. Pension Income £46350 Savings Income £501


I don't know how to scan or insert the results here so I'll give a resume.


Scenario 1
Taxable income £34500 (£46350-£11850)
Tax due £6900 (£34500 x 20%)
Marriage Allowance £238
Total tax liability £6662


Scenario 2
Taxable income £35000 (£46850-£11850)
Tax due £6900 (£34500 x 20%)( £500 classed higher rate band at nil rate)
Marriage Allowance £238
Total tax liability £6662


Scenario 3
Taxable income £35001 (£46851-£11850)
Tax due £6900.40 (£34500 x 20%)( £500 classed higher rate band at nil rate)+(£1 x 40%)
Marriage Allowance not given
Total tax liability £6900.40


To me, this shows that you can earn £500 in interest above the basic band and still benefit from Marriage Allowance.
As this is HMRC's own software it appears, rightly or wrongly, that is the way they treat the situation.
I just wish that I could see that interpretation somewhere in official writing!