MAXIMUM draw down, without tax

Dirty_Dick

I am a bit confused!!

I am retired and have an Occupational Pension (Fire Service) and also have a State pension.

My wife doesn’t work, and has a private pension, paying £1940.52 per year.

I have claimed the Marriage Tax Allowance, and passed this allowance to my wife, which is £1250 per year

My wife also has a pension pot that she wants to draw down on, without paying tax, thereby staying with in her Personal Tax Allowance.

So, my wife has a personal Allowance of £12500, less her amount of private pension (£1940.52)  

BUT where does this Marriage Tax Allowance come in?

Does this get taken OFF the allowance, or added ON ?

What is the maximum she can draw down on the private pension WITHOUT paying tax ?

She has no other income.

Thanks

xylophone

https://www.litrg.org.uk/tax-guides/tax-basics/what-tax-allowances-am-i-entitled#Marj
https://www.gov.uk/marriage-allowance
See above.

Dazed_and_C0nfused

Can you clarify which of you applied for Marriage Allowance?

That person gets a reduced Personal Allowance.  The other gets a tax deduction, not an increased Personal Allowance.

Your wife will have just two sources of income, the £1940 plus drawdown?

Dirty_Dick

I applied for the tax allowance 
and yes, just the pp and drawdown 

Dazed_and_C0nfused

She can drawdown £10,560 in taxable pension before she would be liable to tax.

Depending on where she is resident for tax purposes she can take an additional £1,250 or £1,316 (Scottish resident) on top of the £10,560 on which there would be £250 tax liability but this would then be reduced to £0 as she gets a £250 tax deduction if she has got Marriage Allowance.

So that she doesn't pay tax unnecessarily during the tax year HMRC should give her higher tax code allowances.  In her case it might be something like 194M (current pension) and 1181T (drawdown).

Dirty_Dick

Thanks Dazed & Confused (Love the name !!)
I just couldn't get my head around the numbers !

Dazed_and_C0nfused

If she genuinely does just have those two sources of income and isn't Scottish resident then in reality she can have pension income of £13,750 without ending up with a tax bill.

£1,949 from her current pension and £11,810 taxable drawdown income.

The reason for the initial confusion was because it is probably more common for a Fire Service and State Pension combined to mean there is no benefit in you applying for Marriage Allowance i.e. you would often end up paying £250 more tax and your wife £250 less.

Dirty_Dick

D & C, she is resident in England, and only has those two sources of income. The 1940, and the draw-down, to keep within the tax allowance,
Her State pension is 4 years away, so looking at whittling the pot down a little before that kicks in.
Are you suggesting I cancel the  Married Tax Allowance ?

Dazed_and_C0nfused

Not at all.  If she has a large enough pot then what she is doing seems quite normal drawdown wise.

But are you paying an extra £250 tax to save your wife £250?   

Nothing wrong with that if you are just not what most people applying for Marriage Allowance use it for.

Or do you have two relatively small pensions?

Dirty_Dick

No, I draw about £22000 on my occupational, and about £7800 on my state pension

TBC15

Dazed_and_C0nfused said:

She can drawdown £10,560 in taxable pension before she would be liable to tax.

Depending on where she is resident for tax purposes she can take an additional £1,250 or £1,316 (Scottish resident) on top of the £10,560 on which there would be £250 tax liability but this would then be reduced to £0 as she gets a £250 tax deduction if she has got Marriage Allowance.

So that she doesn't pay tax unnecessarily during the tax year HMRC should give her higher tax code allowances.  In her case it might be something like 194M (current pension) and 1181T (drawdown).

Why is it £1316 for Scotland?