Marriage Allowance Limit

PJC2017

Hi,

My wife is a stay at home mum (with very low income from crafts she sells) and has transferred her annual tax allowance to me, i earn below the threshold but I'm being asked to do some private work which would push me over the threshold but not significantly enough to compensate for the tax break.

I've looked but it doesn't appear that the tax allowance is phased out, just cut off over the 46.3k limit. We could do with the extra money but it seems daft that I may have to decline work as it will end up costing me more or impact on next year's tax.

Just wondering if my understanding is correct and what options do I have?

Alice_Holt

Better to post this on the TAX board, not the BENEFITS board.

Increase your pension contributions to reduce your taxable income?
That would seem the obvious solution to me.

Dazed_and_confused

There is no earnings limit for Marriage Allowance.

You can have income of £50k and be eligible, what matters is the tax rate you pay.

If your pension contributions, either deducted at source which reduce your taxable income, or those paid to a personal pension/SIPP which increase the amount of basic rate tax you pay, mean you only pay basic rate tax and no higher rate tax then you will still be eligible.

Charitable gift aid contributions also increase the amount of basic rate tax band.

The one thing to watch out for is if you have any dividends, this can mean you lose Marriage Allowance even if you don't pay higher rate tax but if you dont have income from dividends then this isn't a problem.

zagfles

Dazed_and_confused wrote: »

The one thing to watch out for is if you have any dividends, this can mean you lose Marriage Allowance even if you don't pay higher rate tax but if you dont have income from dividends then this isn't a problem.

Same with interest.

Dazed_and_confused

Are you sure?

As I understand it interest in the higher rate band which is taxed at 0% doesn't stop eligibility for Marriage Allowance (providing nothing else is taxed at one the higher rates).

Dividends in the higher rate band but taxed at 0% does stop it despite no higher rate tax being paid.

zagfles

Dazed_and_confused wrote: »

Are you sure?

As I understand it interest in the higher rate band which is taxed at 0% doesn't stop eligibility for Marriage Allowance (providing nothing else is taxed at one the higher rates).

Dividends in the higher rate band but taxed at 0% does stop it despite no higher rate tax being paid.

I asked a few months ago and got this answer: https://forums.moneysavingexpert.com/discussion/comment/74398841#Comment_74398841