Marriage allowance: how is 40% level defined

loredo21

The rules are that the allowance can only be transferred to a spouse who is below the 40% band. But, for someone who is just into the 40% band, the transfer (if allowed) would take him/her below that band.

So my question is: for purposes of the marriage allowance rules, is that spouse regarded as above or below the 40% band?

Skint_yet_Again

Eligibility:

your partner’s annual income is between £10,601 and £42,385

As I understand it, if your income is in the 40% band before the transfer of marriage allowance you cant claim

I am not sure if you can you reduce your tax down to 20% by paying into a pension or gift aid and then claim? I'm sure someone with more knowledge than me will come along and advise you.

loredo21

Thanks to blonde bubbles and Skint yet again. It looks like it is the pre-transfer situation that determines the eligibility. So i will also bear this in mind when I decide how much pension drawdown I should take

Just one other point. Does savings income less than £5000 contribute to my annual income total when deciding whether i have reached the £42,385?

zygurat789

blondebubbles wrote: »

The 40% band starts at £42,385 (this year). If your salary is under that then you qualify.

#

This is not the case. The tax band is determined by the taxable income not the gross income.
The legislation says that anyone who is paying greater than basic rate is ineligible so that would be before the transferable allowance.

zygurat789

Skint_yet_Again wrote: »

Eligibility:

your partner’s annual income is between £10,601 and £42,385

As I understand it, if your income is in the 40% band before the transfer of marriage allowance you cant claim

I am not sure if you can you reduce your tax down to 20% by paying into a pension or gift aid and then claim? I'm sure someone with more knowledge than me will come along and advise you.

This comes from gov.uk which, quite simply, is wrong.
the legislation does not mention salaries paid it definition is in tax rate paid.
It is quite possible to have a salary of less than £10,600 and pay higher rate tax just as it is possible to have a salary of more than £42,385 and not pay higher rate tax.

zygurat789

loredo21 wrote: »

Thanks to blonde bubbles and Skint yet again. It looks like it is the pre-transfer situation that determines the eligibility. So i will also bear this in mind when I decide how much pension drawdown I should take

Just one other point. Does savings income less than £5000 contribute to my annual income total when deciding whether i have reached the £42,385?

See above the £42,385 is irrelevant.
Savings income of less than £1,000 would not affect your tax rate.

loredo21

Thanks zygurat789 for correcting my figure to £1000 for the savings interest allowed without affecting tax band though, now i think about it again, I believe this only applies from April 2016.

When i quoted the larger figure, i think i was confusing my situation with the interest allowance of people earning less than £10,600