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Marriage Allowance

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  • zygurat789
    zygurat789 Posts: 4,263 Forumite
    Part of the Furniture Combo Breaker
    vacheron wrote: »
    One query I still haven't been able to get a definitive answer to is what happens if your salary increases after the allowance has been processed.

    Example:
    • Before the allowance a salary below £42,385 would make you a basic rate taxpayer.
    • After the allowance a salary below £43,445 would make you a basic rate taxpayer.

    What would happen if someone earned £42000 when they applied but subsequently received a pay rise to £43000. They would be earning over the £42,285 the uk.gov website says is the upper limit for eligibility but at the end of the year would still be a basic rate taxpayer.

    Would you have to inform HMRC and have the allowance removed making you ineligible forever unless your salary dropped in the future, or could you continue claiming as a basic rate taxpayer? :undecided

    The legislation says that you will be entitled to MA if you do not pay tax at greater than base rate so if you earn £43,000 with no other allowances than PA and no benefits then you will not be entitled to MA and it will be clawed back.
    If you have a company car then any salary c£40K will probably be too much to qualify.
    The only thing that is constant is change.
  • vacheron
    vacheron Posts: 2,178 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    edited 20 July 2015 at 2:22PM
    zygurat789 wrote: »
    The legislation says that you will be entitled to MA if you do not pay tax at greater than base rate so if you earn £43,000 with no other allowances than PA and no benefits then you will not be entitled to MA and it will be clawed back.
    If you have a company car then any salary c£40K will probably be too much to qualify.
    Thanks for responding zygurat789.

    The "not quite catch 22" situation I was trying to explain is:

    Consider a basic rate taxpayer with a standard personal allowance:

    They are currently earning less than £42,385 so they are eligible to apply for MA which means that they can now earn up to £43,445 and still be a basic rate taxpayer (£10,600 PA + £1,060 MA + £31,785 @ 20%).

    My question was that if they then get a mid-year pay-rise taking them to somewhere between £42,385 and £43,445, at the year end they are still a basic rate taxpayer but they will have earned in excess of the £42,385 stated on the MA website.

    The question I've been asking HMRC without success is which specific condition results in ineligibility: Being a high rate taxpayer as stated in the legislation OR earning in excess of £42,385 as stated on the gov.uk website?

    Your example suggests that it is the former which is what I am personally hoping for. :)
    • The rich buy assets.
    • The poor only have expenses.
    • The middle class buy liabilities they think are assets.
    Robert T. Kiyosaki
  • zygurat789
    zygurat789 Posts: 4,263 Forumite
    Part of the Furniture Combo Breaker
    If you pay tax at greater than the basic rate you do NOT qualify for MA.
    It is therefore irrelevant that you pay only at BR after MA.
    Forget the figures quoted on gov.uk, what is important is the highest rate of tax you pay. It would be possible to pay HR tax if you earned £30k and had an expensive gas guzzling car and fuel paid for.
    The only thing that is constant is change.
  • vacheron
    vacheron Posts: 2,178 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    edited 21 July 2015 at 12:10AM
    zygurat789 wrote: »
    If you pay tax at greater than the basic rate you do NOT qualify for MA.
    It is therefore irrelevant that you pay only at BR after MA.

    I appreciate that you do not qualify for MA if you are a higher rate taxpayer at the time of application.

    My question related to what the situation would be if after the increase in your Personal Allowance because of the MA, your salary then increased to a level that would have taken you into the higher rate bracket if it were not for the MA. However because you are now in receipt of MA you remain a basic rate taxpayer.

    Would you therefore be eligible to continue receiving the MA in subsequent years?
    • The rich buy assets.
    • The poor only have expenses.
    • The middle class buy liabilities they think are assets.
    Robert T. Kiyosaki
  • ntokmetz
    ntokmetz Posts: 24 Forumite
    Tenth Anniversary 10 Posts Combo Breaker
    Hello all,

    I am self-employed (freelancer), hence I do not know exactly what my income for 2015-2016 will be till April 2016 when I'll be doing my tax return. Usuallly I am below the 10,600 so could transfer allowance to my husband but what if, say, by April 2016, I am actually over the personal allowance and we have already claimed?
    Would I need to provide an exact income amount to HMRC at this stage?

    Thank you
  • Broadwood
    Broadwood Posts: 706 Forumite
    Part of the Furniture 500 Posts Photogenic Combo Breaker
    ntokmetz wrote: »
    Hello all,

    I am self-employed (freelancer), hence I do not know exactly what my income for 2015-2016 will be till April 2016 when I'll be doing my tax return. Usuallly I am below the 10,600 so could transfer allowance to my husband but what if, say, by April 2016, I am actually over the personal allowance and we have already claimed?
    Would I need to provide an exact income amount to HMRC at this stage?

    Thank you

    As I understand it from the example here https://www.gov.uk/marriage-allowance-guide you would then be taxed using your revised higher and lower personal tax codes, unless you chose to revert back to both original standard personal codes.
    Never trust a financial institution.


    Still studying at the University of Life.
  • zygurat789
    zygurat789 Posts: 4,263 Forumite
    Part of the Furniture Combo Breaker
    vacheron wrote: »
    I appreciate that you do not qualify for MA if you are a higher rate taxpayer at the time of application.

    My question related to what the situation would be if after the increase in your Personal Allowance because of the MA, your salary then increased to a level that would have taken you into the higher rate bracket if it were not for the MA. However because you are now in receipt of MA you remain a basic rate taxpayer.

    Would you therefore be eligible to continue receiving the MA in subsequent years?

    Tax is dealt with on a year by year basis, what the situation is in the year is irrelevant compared to the situation at the end of the year, so the transfer may be undone in one year but may not be undone in the next year.
    The only thing that is constant is change.
  • Finally managed to apply for this at the end of last month and managed to do it online. Had the confirmation that it was successful but not had any notification of new tax codes yet but just checked my bank account for my pension and there's an extra £70 in there :j:beer:. I just need to wait for my payslip now to confirm it!
  • good_advice
    good_advice Posts: 2,653 Forumite
    1,000 Posts Combo Breaker Mortgage-free Glee! Rampant Recycler
    Thanks Martin and team. I read about this MA in the newsletter and applied.In the week I was sent the online application form and today filled it in without any problems. Now waiting for the letter to oh to say about the new tax code change.
    The secret to success is making very small, yet constant changes.:)
  • Broadwood
    Broadwood Posts: 706 Forumite
    Part of the Furniture 500 Posts Photogenic Combo Breaker
    Yay! Yesterday I received my first payslip with the taxcode 1166M and also a lovely tax rebate. Was worth the wait.

    Thanks HMRC.:D
    Never trust a financial institution.


    Still studying at the University of Life.
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