Marriage Allowance income calculation (pension impact?)

Larches

Does anyone know if private pension contributions make any difference to income calculations for the purposes of checking Marriage Allowance eligibility?

I have some recollection that tax relief on personal pensions can make a difference to what is regarded by HMRC as taxable income, i.e. not just a case of income less personal allowance, but that the amount of pension contributions are factored in too. Does this ring a bell with anyone? I've not been able to get very far finding out online (or with HMRC) so far.

Thanks.

Dazed_and_C0nfused

This is quite a good guide, in particular note the example of John which highlights a situation where you wouldn't be eligible (as transferor or recipient) despite not being liable to any higher rate tax.

https://www.litrg.org.uk/tax-guides/tax-basics/what-tax-allowances-am-i-entitled

Larches

Thank you, that is a pretty clear summary. I'm not sure it answers my specific uncertainty about pension contributions, which makes me wonder if that aspect isn't relevant after all, as the article otherwise seems quite comprehensive.

Jeremy535897

See https://www.moneysavingexpert.com/family/marriage-tax-allowance/

Look at the section on earning over the higher rate threshold.

Larches

Thanks. Unfortunately we're not in higher rate territory, but that may explain where I got this recollection from about pension contributions making a difference, as I understand they can reduce the taxable income figure for higher rate taxpayers due to the additional tax relief available (not sure if that remains the case for Marriage Allowance calculations, but in any case not something we have to 'worry' about as things stand!).

Jeremy535897

If you are not paying higher rate tax before taking account of pension contributions, you don't need to consider the point at all. 

Dazed_and_C0nfused

Larches said:

Thanks. Unfortunately we're not in higher rate territory, but that may explain where I got this recollection from about pension contributions making a difference, as I understand they can reduce the taxable income figure for higher rate taxpayers due to the additional tax relief available (not sure if that remains the case for Marriage Allowance calculations, but in any case not something we have to 'worry' about as things stand!).

Marriage Allowance eligibility is based on what tax rate you are liable to.  If not liable to higher rate tax then you would be eligible (as either transferor or recipient).  The one exception to this is where you have dividend income taxed at 0% (dividend nil rate) which would be taxed at higher rate if the dividend nil rate didn't exist.

Remember most pension contributions don't reduce your taxable income, they increase the amount of your basic rate tax band, meaning more income can then be taxed at 20% and less at 40%.  So still potentially beneficial for Marriage Allowance eligibility purposes.

Larches

Ah OK, I think that clears it up then. Thanks both!