Marriage Allowance transfer

Chunks

Hope you guys can help with a quick question. For the tax year 2018/19, my wife has interest income of roughly £8,880 and a pension income of £7,300. Total income is greater than her personal allowance obviously but can she nevertheless transfer 10% of her personal allowance to me?

I tried the HMRC helpline several times but keep getting cut off as they are too busy!!!

Many thanks in advance.

TadleyBaggie

Seems pointless, she would pay more tax and you less but the nett effect would be zero. It only makes sense if the 10% of the allowance being transferred would otherwise be unused.

BoGoF

No she can't.

Dazed_and_confused

Yes she can. Providing she isn't deemed to be a higher rate payer then she is eligible for Marriage Allowance.

Whether you (as a couple) can benefit from her applying for Marriage Allowance is different.

But based on what you have posted then you may well be able to.

By applying your wife will make herself liable to be taxed on £4,930 (total taxable income £16,180 less Personal Allowance £11,250).

The Personal Allowance will ensure none of the pension income needs to be taxed which means it is £4,930 of the savings interest which needs to be taxed.

This will all be at the savings starter rate of 0% so although liable to be taxed she has no tax to pay.

She could actually have an extra £1,070 income and still not have any actual tax to pay.

You will receive a tax credit which reduces your tax liability by a maximum of £238 for 2018:19 (you don't get any extra Personal Allowance).

polymaff

OP, follow D+C's advice - and only D+C's advice. The other responses are quite wrong.


And don't bother following this up with HMRC as they generally don't understand this area of taxation either.


There are some minor issues which might stop the MAT - you being a higher-rate taxpayer, she being non-UK-resident for tax - and you need to be actually paying tax for 2018/19, but if they don't apply, then, if that is your wife's total taxable income for 2018/19, you two are prime candidates to benefit from MAT.

Chunks

Thanks to all for taking the trouble to respond. Wife and I spent hours online and the phone trying to get a steer on this. Based on what I have read generally and here specifically, here's what I believe my wife's tax calculation is:


Total income received (18/19) £16,180


Minus Personal Allowance £11,850* Less Marriage Allowance transfer £1,190 Net £10,660


Total income on which tax is due £ 5,520


Tax Due

Savings interest (Amount Percentage Total)

Starting rate £5,000 @ 0% = £0
Basic rate band at nil rate £520 @ 0% = £0


Look about right guys?

By way of a PS. as the beneficiary of the transfer, do I get a higher allowance of £1,190 or a tax credit?



D&C - *The standard Personal Allowance from 6 April 2018 to 5 April 2019 is I believe £11,850 but using your figures your reference to being able to earn another £1,070 relates to the effect of applying the starting rate and the 'nil band'?

Sorry nil band became another mine field for me and while I read a lot of information, understanding was in short supply!


polymaff - we meet the MA transfer based on criteria based on your response.


kindest regards and thanks


Chunks

Dazed_and_confused

Yep, sorry I got the wrong years Personal Allowance (2019:20), you have used the correct one

By way of a PS. as the beneficiary of the transfer, do I get a higher allowance of £1,190 or a tax credit?

A tax credit worth £238 (£1,190 x 20%). If you paid less than £238 in tax you cannot have the surplus credit refunded.

Chunks

Thanks again D&C. Since you haven't thrown your virtual hands in the air, I am going to take my analysis (and understanding) as correct.



Appears overly complicated to me but hey ho.



I tried to get a BR735 from the DWP recently. It took two goes and six weeks before they eventually sent three replies; didn't coincide to the tax year in question (like a P60 does) chocolate teapots and all that


You're a star.


Chunks

polymaff

Chunks wrote: »

By way of a PS. as the beneficiary of the transfer, do I get a higher allowance of £1,190 or a tax credit?

This issue confuses many. The legislation says "transfer" but HMRC's interpretation of this is really mixed up. MAT plays no part in the calculation of the beneficiary's tax liability. It is purely a credit added to your HMRC account.


HMRC did what they did - they told me - as they saw it as a means of minimising the risk of exploitation of a new income tax measure. What they actually achieved in exchange for one set of unexpected exploits - was another set of unexpected exploits..:rotfl:

Chunks wrote: »

Look about right guys?

Yes, £11,850-£1,190 is a PA of £10,660. That completely covers the pension and leaves £10,660-£7,300, i.e. £3,360 of PA left over for the savings. Applying the remaining PA to the savings leaves you with £8,880-£3,360 taxable, i.e. £5,520. Almost as though the government is your wife's fairy-godmother, the system then steps up to the plate with two savings-only 0% tax bands totalling £6,000 - leaving your wife free of any income tax to actually pay.

Chunks

Thank you kind Sir, particularly for using the words ‘government’ and ‘fairy-godmother’ in the same sentence. I am more used to ‘government’, the workings thereof (of whatever political persuasion) and ‘opaque/inefficient/confusing’. Perhaps it’s me.

Enjoy your Sunday and thanks again.

polymaff

Chunks wrote: »

I tried to get a BR735 from the DWP recently.

Mission impossible!!! DWP and HMRC love to play pass the buck on this one. Why is this info so hush-hush? Especially in the first, incomplete, tax year of the SP.