Marriage Allowance

teddysmum

polymaff wrote: »

I would need to do quite a bit of research to confirm this, but I believe that HMRC's implementation of the MAT is that the MAT will not take place if the donor's taxable income exceeds the personal allowance both before AND after its potential adjustment.

Last year I applied for MAT as my husband is a basic tax payer and my income was below £10600.


However, as it was a case of £1060 or nothing, I transferred that amount, meaning that my income was actually slightly over my new PA.


This meant that, though my husband saved £212 in tax, I had to pay a small amount on the overspill (assume £10), so as a couple we still saved £202.


Is this what you are referring to ?

teddysmum

polymaff wrote: »

@Teddysmum. You're fundamentally wrong in that you've not taken into consideration the Starting Rate Allowance which, for the example of £9,000 Non-Savings Taxable Income would give enough relief to produce a zero tax bill irrespective of which of the savings figures you quote applies and whether MAT was applicable or no

There certainly would be a zero tax bill for the lower earner (I have not claimed this to be the case), but if savings interest decides whether you can get MAT (ie by taking you over £11000), then without MAT, you as a couple lose out by the tax which would have been saved by the receiver of MAT.


If savings interest works in this way, I can't see a flaw in my calculations/logic, but I did say it was done on the basis of the interest having an effect.


To reiterate:


The adjusted PA is £9900


A pension of £9000 with interest of £2000, brings the income to £11000, so no tax, but the spouse saves the donor/couple £220, so a total income of £11220.


If interest does have an effect, then with the same £9000 pension but £2001 interest, the income rises to £11001, so no tax (as this meets the criteria for zero interest tax) , but without MAT, there is no saving of £220 , so the income is £11001 ie less than if the interest was just £2000. (A loss of £219 by gaining £1 in interest.)
This does latch on Sam of MSE's claim that you don't need to include the first £5000 of savings interest, which information he says is on the online application form. Should he possibly he should have said that you should declare it, but the savings interest won't count against eligibility for MAT ? (Can anyone confirm what it does say about £5000 savings interest, please ?)

Dazed_and_confused

polymaff
"I would need to do quite a bit of research to confirm this, but I believe that HMRC's implementation of the MAT is that the MAT will not take place if the donor's taxable income exceeds the personal allowance both before AND after its potential adjustment"

I'm sure this can't represent HMRCs view - have a play around with the HMRC calculator in link below

https://www.tax.service.gov.uk/marriage-allowance-application/benefit-calculator

teddysmum

Dazed_and_confused wrote: »

polymaff
"I would need to do quite a bit of research to confirm this, but I believe that HMRC's implementation of the MAT is that the MAT will not take place if the donor's taxable income exceeds the personal allowance both before AND after its potential adjustment"

I'm sure this can't represent HMRCs view - have a play around with the HMRC calculator in link below

https://www.tax.service.gov.uk/marriage-allowance-application/benefit-calculator

You agree with my comment/example of my situation last tax year, as there are multiple examples like this ? #562

Dazed_and_confused

polymaff wrote: »

The changes in taxation have thrown up all sorts of anomalies.

Consider someone with an occupational pension of £11k and some savings income starting to receive a state pension of £6k. Before the state pension starts, up to £5k of savings income is taxed at 0% due to the Starting Rate Allowance. After the state pension starts the SRA vanishes and so the pensioner pays the expected 20% on the state pension PLUS 20% on the up to £5k of savings income - a marginal tax rate of up to 40% on a significant fraction of only £22k of income. This penalty on a low-income tax-payer of up to £1,000 puts the relatively low losses due to anomalies involving MAT and the PSA into perspective.

Badly thought out tax policy produces unfair outcomes.

@Teddysmum. You're fundamentally wrong in that you've not taken into consideration the Starting Rate Allowance which, for the example of £9,000 Non-Savings Taxable Income would give enough relief to produce a zero tax bill irrespective of which of the savings figures you quote applies and whether MAT was applicable or not.

I would need to do quite a bit of research to confirm this, but I believe that HMRC's implementation of the MAT is that the MAT will not take place if the donor's taxable income exceeds the personal allowance both before AND after its potential adjustment.

@DazedAndConfused. Your response to Teddysmum seems to suggest that you still disagree with Sheramber, Zagfles and myself re: criteria for the granting of MAT including not having a taxable income greater than or equal to the Personal Allowance. Do you now recognise that you were wrong to rely on the specific GOV.UK advice you referred to?

I recognise that the gov.uk site has conflicting information but I stand by my guns when it comes to what the correct end result will be

I have looked at sherambers post again and wonder if the rules which are causing the difference of opinion relate to different - non resident? - people?

the individual would not for that year
be liable to tax at a rate other than the basic rate, the dividend
ordinary rate or the starting rate for savings,
and

(d) where the individual meets the requirements of section 56
(residence) for the tax year by reason of meeting the condition
in subsection (3) of that section, the individual meets the
condition in subsection (2) of this section.
(2) The condition is that the individual’s hypothetical net income for the
tax year concerned is less than the amount of the personal allowance to
which the individual is entitled for that tax year under section 35 or 37

Dazed_and_confused

teddysmum wrote: »

You agree with my comment/example of my situation last tax year, as there are multiple examples like this ? #562

I think the situation in post 562 could happen and the calculator referred to in #564 backs that up.

I believe the example from your earlier post is wrong as in that situation I think you could apply for the transfer and your spouse would be (upto) £212 or £220 better off depending on whether the year in question is 2015:16 or 2016:17

Earnings/pension £9000, savings interest £2200 (no transfer allowed) - Total £11200

teddysmum

Dazed_and_confused wrote: »

I'm saying I believe someone with approx 9000 pension and 2000 interest could still apply for marriage allowance and not have any tax to pay

9000 + 2000 = 11000 income
11000 - 9900 personal allowance = 1100 liable to tax
Tax due = 0 (1100 x savings rate of 0%)

The personal savings allowance is indeed a nil rate band like the dividend one and existing savings rate band but i think that the PSA isn't due on this mix if income types/values and this isn't a problem as no tax is due so PSA is unnecessary.

If you put £11000 and £20000 as incomes in the calculator you refer to, it refuses you MAT (I'm assuming earned income or pension), but not for £10999 and £20000.

teddysmum

Dazed_and_confused wrote: »

I think the situation in post 562 could happen and the calculator referred to in #564 backs that up.

I believe the example from your earlier post is wrong as in that situation I think you could apply for the transfer and your spouse would be (upto) £212 or £220 better off depending on whether the year in question is 2015:16 or 2016:17

Earnings/pension £9000, savings interest £2200 (no transfer allowed) - Total £11200

This is what I asked if you agreed with, as it was my own situation last tax year:


Last year I applied for MAT as my husband is a basic tax payer and my income was below £10600.


However, as it was a case of £1060 or nothing, I transferred that amount, meaning that my income was actually slightly over my new PA.


This meant that, though my husband saved £212 in tax, I had to pay a small amount on the overspill (assume £10), so as a couple we still saved £202.

Dazed_and_confused

teddysmum wrote: »

If you put £11000 and £20000 as incomes in the calculator you refer to, it refuses you MAT (I'm assuming earned income or pension), but not for £10999 and £20000.

It doesn't refuse anything when I put those figured in, simply says you won't be better off but as this is a very simple calculator and you can't specify what income sources you have I don't believe that is the correct answer for everyone - for a low earner on wages of £11000 there would be no benefit but I still believe it is possible to apply and be better off (as a couple) where savings income is involved.

Try putting £10500 and £20000

Dazed_and_confused

teddysmum wrote: »

This is what I asked if you agreed with, as it was my own situation last tax year:


Last year I applied for MAT as my husband is a basic tax payer and my income was below £10600.


However, as it was a case of £1060 or nothing, I transferred that amount, meaning that my income was actually slightly over my new PA.


This meant that, though my husband saved £212 in tax, I had to pay a small amount on the overspill (assume £10), so as a couple we still saved £202.

In your post you put no transfer allowed and I disagree with this - I think the transfer could be applied for when someone has the income types/amounts of pay 9000 and savings income 2200 and this lower earner would have no tax to pay (nothing to pay whether the year is 2015:16 or 2016:17)