Marriage allowance and AVC 25 September 2020 at 5:59PM in Cutting Tax 7 replies 92 views

nitrams19

Iv'e been claiming the marriage allowance for a few years but now i find i am getting close to the £50000 threshold. I pay AVC into my pension does this get deducted from my yearly gross income so taking well within the threshold or is it calculated on my gross pay.

Dazed_and_C0nfused

Marriage Allowance is dependent on what tax rate you are classed as.  But it isn't something you can "claim".

Pension contributions generally work in one of two ways, they reduce your taxable pay (a net pay scheme) or they increase the amount of your basic rate tax band (relief at source contributions).

So until you know what type of contribution the AVC is you won't know how it works but overall it will be helping one way or the other.

nitrams19

My AVC are paid at source which reduces tax i pay. I'm on P A Y E.

Dazed_and_C0nfused

That's a bit of a contradiction.

Relief at source is where you pay a pension company and that add the 25% uplift.  Those contribution do not reduce your taxable income.

Net pay is where you earn say £30,000 and contribute say £3,000 to the pension scheme and as a result your taxable pay is only £27,000.

nitrams19

Sorry got relief at source wrong, mine is net pay then.

Dazed_and_C0nfused

Then it should already be reflected in a lower P60 taxable pay amount.

Roygroyg

I've also been getting the marriage allowance for the last few years (not sure what the correct phrase is as I would have probably said claiming like yourself as we had to initiate it). 
It is based on income after deduction for pension contributions so should be your pay before tax but after the AVCs. I don't have AVCs but have been using combination of employer scheme salary sacrifice and direct payments to SIPP to keep me below the higher rate tax threshold (£43,500 in my case as in Scotland) each of those years and still received the increased allowance from the marriage allowance transfer ok.

Roygroyg

As a further note any gift aided charitable contributions in the tax year also come off if included.
There is also a section in the self assessment return that allows you to actually claim charitable contributions in the new tax year but charge against old year. Useful if you mess up your calculations and go slightly over the higher tax threshold as I did one year after underestimating interest income (back when it was actually a decent rate )