£6000 tax free interest on savings when on low wages question

smjxm09

We use the wife’s Marriage allowance which drops her tax free allowance to I believe £10750, as she earns around £9000 per year.

Much of our non ISA savings is in her name but am I correct in thinking that she will get the full £6000 savings allowance on her savings as she earns so little meaning she won’t get a tax bill on a combined income of up to £16750 or is the staring point her wage £9000+£6000=£15000?

bowlhead99

Her personal allowance after giving you 10% of her £12500 allowance is £11250.

If she earns £9000 it will use up £9000 of the £11250. She then has £2250 left to earn savings and investment income within the personal allowance.

After she has used the personal allowance she can get £5000 of interest income at 0% from the starter rate for savings income.

She can also get another £1000 at 0% from the 'personal savings allowance'.

So, that's £2250+5000+1000 of interest that could be earned without paying tax. To get that much interest might imply there's a lot of cash sitting around, so perhaps worth noting she could also get £2000 of dividend income from investments at 0% too.

smjxm09

Thank you for the answer. I have been trying to get my head around the question for years.

Dazed_and_confused

And just in case you have savings income you should be aware that your Personal Tax is still £12,500.

Being the recipient of Marriage Allowance does not entitle you to any additional allowances, it gives you a tax deduction of your income tax liability. Worth up to £250 in the current tax year.

Hammer_Time

Dazed_and_confused said:

And just in case you have savings income you should be aware that your Personal Tax is still £12,500.

Being the recipient of Marriage Allowance does not entitle you to any additional allowances, it gives you a tax deduction of your income tax liability. Worth up to £250 in the current tax year.

So are you saying that you’re not entitled to the personal allowance of £1000 and or £5000 if you are a low earner and you get the marriage allowance. 

Dazed_and_C0nfused

No.  Marriage Allowance means different things for the transferror and recipient.

And their is no Personal (Savings) "Allowance" of £1,000.  It is a 0% tax rate which can only be used by those people with sufficient income to use all of their Personal Allowance and, if available, savings starter rate band.

The transferror has a reduced Personal Allowance of £11,250 (current tax year).  If they have sufficient income they can then use the savings starter rate band and then the savings nil rate (aka PSA).

The recipient has a Personal Allowance of £12,500 (current tax year).  If they have sufficient income they can then use the savings starter rate band and then the savings nil rate (aka PSA).  Once their tax liability has been calculated £250 is deducted, this is the Marriage Allowance tax credit the recipient is entitled to.