Marriage Allowance

Dazed_and_confused

Is the amount of tax free limit you can transfer, a fixed amount of £1250*, rather than 10% of your Personal Allowance. (* based on current PA figures)

I ask, because I want to get this all tee'd up for when DH is due to start drawdown on his pension, so he can draw more, tax free. I don't work, but currently have a tax code of 1158L, due to having earned £911 interest during 2018-19.

So can I transfer the whole £1250 to him, or can I only transfer 10%, being £1158?

You are getting confused your Personal Allowance and your tax code allowances.

The two are separate and Marriage Allowance is based on your Personal Allowance.

If you are entitled to a Personal Allowance there are only two situations where it isn't £12,500.

1). You have applied for Marriage Allowance
2). Your adjusted net income is more than £100,000

Just_Passing_Bi

Hi

It's all very confusing :(

Just curious, we're in a Civil Partnership, are we entitled to marriage allowance, if so, how do we go about it?

molerat

Just_Passing_Bi wrote: »

Hi

It's all very confusing :(

Just curious, we're in a Civil Partnership, are we entitled to marriage allowance, if so, how do we go about it?

https://www.gov.uk/marriage-allowance

You can benefit from Marriage Allowance if all the following apply:

• you’re married or in a civil partnership

unholyangel

Sea_Shell wrote: »

Quick Question, and apologies if it's been answered up thread.

Is the amount of tax free limit you can transfer, a fixed amount of £1250*, rather than 10% of your Personal Allowance. (* based on current PA figures)

I ask, because I want to get this all tee'd up for when DH is due to start drawdown on his pension, so he can draw more, tax free. I don't work, but currently have a tax code of 1158L, due to having earned £911 interest during 2018-19.

So can I transfer the whole £1250 to him, or can I only transfer 10%, being £1158?

Gov.uk reads to me like it will still be £1250, but just wanted to check with you knowledgeable lot! Cheers

Given your reason to transfer to your husband, I'm going to ask if this is a lump sum drawdown or regular payments?

Just lump sums are usually taxed on an emergency code and you have to reclaim tax back. Even on a cumulative code, more tax can be deducted than what people were expecting if they aren't aware of apportioning.

Dazed_and_confused

And don't forget someone in receipt of Marriage Allowance (with adjusted net income less than £100,002) only gets the standard Personal Allowance of £12,500.

Marriage Allowance does not entitle you to any additional tax allowances, it gives you a £250 deduction in your tax liability (in the current tax year).

allanm01

I first became aware of this through filing my 2018-2019 Self-Assessment return (must have sleepwalked through the last 4 years ...!) I am the lower earner, and have been for a couple of years. My question is: is applying through self-assessment identical in effect to applying using the dedicated HMRC tool? ie, backdating, etc? The page presented in self-assessment simply captures my wife's basic details and NI number. There is no button to check regarding backdating, or specifying provision of the backdated amount by cheque. But then, this may be the case for the basic application too; I didn't want to go through both processes to find out if they are different, but hoped someone might know?

Dazed_and_confused

No, making an application via your Self Assessment return only applies to the year of the tax return, presumably 2018:19.

Once you have filed your return your spouse's records should be updated and their tax recalculated to incorporate the Marriage Allowance tax credit.

There is no button to check regarding backdating, or specifying provision of the backdated amount by cheque

There won't be as that is absolutely nothing to do with you. By applying you are agreeing to give up part of your Personal Allowance. Your spouse will then receive a tax credit but the real impact of that is between your spouse and HMRC. It may mean a refund, it could reduce an existing tax debt but that is their business not yours. Confidentiality and all.

Before doing anything about the previous tax years I suggest you carefully check your Self Assessment calculations for each year (2015:16, 2016:17 and 2017:18) as it easy to forget your exact income levels from that long ago and it would be very easy to blithely apply and end up owing c£700.

Remember there is a big difference between being eligible for Marriage Allowance and being able (as part of a couple) to benefit from it. Someone earning £40k is eligible to apply but in most cases there would be no benefit in applying.

If you apply HMRC will have to accept your application even if it means you end up with a tax bill for each year.

Much less hassle to make sure of the position before applying.

allanm01

Dazed_and_confused wrote: »

There won't be as that is absolutely nothing to do with you.

Well, backdating certainly is something to do with me, as you go on to explain! Granted your point about the cheque.

Before doing anything about the previous tax years I suggest you carefully check your Self Assessment calculations for each year (2015:16, 2016:17 and 2017:18) as it easy to forget your exact income levels from that long ago and it would be very easy to blithely apply and end up owing c£700.

Well, that's part of my confusion. I understood that backdating happened automatically - but you are saying this is not the case if done via self assessment. So it appears I can make a 2018-19 claim via SA, then (if the net result of all backdated years is positive) must separately make a claim using the HMRC tool for prior years.

If you apply HMRC will have to accept your application even if it means you end up with a tax bill for each year.

The only circumstance I can see that being an issue is if my wife's income was below (her allowance + 10% of mine) in any year in which my income exceeded 90% of my allowance. If the first is true but not the second, all or part of the transferred allowance would go unused, nothing to pay. If the second is true but not the first, any extra tax I pay is exactly matched by her refund. If neither is true, it's all refund.

Dazed_and_confused

Well, that's part of my confusion. I understood that backdating happened automatically

No, if you applied in the current tax year the application will roll forwards each year until you or your spouse opt to stop it. But applications for a tax year that has already ended apply to that individual year only. So if you file a 2018:19 Self Assessment return and apply on the return that is going to be Marriage Allowance for that year only.

You would have to make three additional applications to HMRC for the three earlier years,using either the gov.uk process or maybe one phone call might do it but you'd have to specify you wanted to apply for all three years.

If you were earning say £20,000 in a year and you applied then HMRC are obliged to accept your claim as you are eligible for Marriage Allowance.
However, you would then likely end up with a tax bill of £214* (using 2015:16 as an example).
*if you filed a Self Assessment return for the year then it would only be £212

If your spouse was an employee being taxed under PAYE her tax refund would likely only be £210. Appreciate it's not a huge loss overall for you as a couple but if they chose to spend their refund on themselves you would still have the £214 to pay.

Potentially multiply that by 3 years and you are at least £10-£12 out of pocket as a couple and that is before you have persuaded your spouse to hand over their refund to pay your tax bill.

When checking your calculations make sure you factor in the 0% tax rates. In extreme circumstances and with the right types of income someone can apply for Marriage Allowance, have taxable income of £17,250 and still have no tax to pay (current tax year figures).

allanm01

@Dazed & Confused

OK ta. It was this on the MSE explainer that confused me:

This means that if you claim now and backdate, so you get this year's, and all the previous years' allowance, you'll get up to £1,150. You'll be paid money for previous tax years as a cheque. You won't have to tick any boxes or make a special request for this as it'll happen automatically.

I read the 'happen automatically' as being the entire paragraph, not just the prior sentence as I now realise.

You would have to make three additional applications to HMRC for the three earlier years,using either the gov.uk process or maybe one phone call might do it but you'd have to specify you wanted to apply for all three years.

Having decided to do everything through the HMRC tool, it's not quite as bad as multiple applications - at the end of the process you are asked separately for each possible year if you want it included; a simple click for each. So I'll scrub the MTA section from my 2018-2019 self-assessment. If I decide to claim for 2019-2020 et seq, I can do so as a backdated claim, but I will have the option of using pension drawdown to mop up my unused allowance going forward, so probably won't bother.

However, you would then likely end up with a tax bill of £214 {...} If your spouse was an employee being taxed under PAYE her tax refund would likely only be £210.

OK, it's academic so I won't quibble, but I'd have expected the £4 PAYE bands to apply the same in both directions, net zero.

When checking your calculations make sure you factor in the 0% tax rates.

Cheers - if I understand you correctly the only relevant income is a small amount of interest and a company share scheme dividend below the £2000 threshold.