Marriage Allowance - Reducing take home to qualify

carrspaints

Hi. I have searched through the forum to find similar threads, so apologies if covered but I haven't found it.

My annual salary puts me at around £54.5k p.a. My wife hasn't worked in over a decade. My wife has never applied for Marriage Allowance, as we always assumed my salary disqualified her from doing so. However, I have been paying in (salary sacrifice) 25% of my salary to my Pension since January 2018. I have just increased that to 40%. I am in a ‘net pay’ arrangement, the pension contribution is deducted before tax is calculated on my pay.

My question is this. Is the qualifying criteria for Marriage Allowance based on my annual salary, my taxable income, my pay after all deductions, or my take home after pension deductions only? Thanks.

Jeremy535897

Assuming your salary is your only income, it depends on whether that figure of £54,500 is before or after the salary sacrifice. The correct figure to use is the figure after the salary sacrifice.

carrspaints

Thanks. So my wife should be able to apply then, as my salary is the only income we have. Additionally, the £54,500 salary is before my current 25% salary sacrifice is taken off. After sacrifice and other deductions such as BIKs, my taxable pay is £3,375.50/month or £40,506 p.a.

Dazed_and_C0nfused

No, you cannot "claim" Marriage Allowance.

Your spouse can apply and HMRC will check if you are both eligible.

If you are both eligible then they will recalculate the tax position for both of you for each tax year she has applied for (2017:18 being the earliest year she can apply for).

You need to consider all taxable income and ultimately what matters, for both of you, is whether you are liable to higher rate tax.  If neither of you are then you are both eligible.

Your wife will get a reduced Personal Allowance and you will get a deduction if your tax liability each year.

Jeremy535897

Why do you describe benefits in kind as a deduction? £54,500 @75% = £40,875, so what you describe as BIK is presumably an expense of employment of £369 (perhaps WFH £312 plus a small fixed allowance)?

carrspaints

I may not have described that correctly.

My payslip states my salary, which then adds a small "Benefit Fund". It then subtracts my pension contribution (salary sacrifice), Income Protection cost, Life Assurance & Private Medical costs. That leaves me with a total of the £3,375.50 before tax that I mentioned above. I mentioned BIK because my company car used to be taxed at source, but that is now done via HMRC and tax code adjustment as of 2021.

[Deleted User]

carrspaints said:

I may not have described that correctly.

My payslip states my salary, which then adds a small "Benefit Fund". It then subtracts my pension contribution (salary sacrifice), Income Protection cost, Life Assurance & Private Medical costs. That leaves me with a total of the £3,375.50 before tax that I mentioned above. I mentioned BIK because my company car used to be taxed at source, but that is now done via HMRC and tax code adjustment as of 2021.

So your income for tax purposes is 40506 plus the BIK. What is the BIK value in your tax code?

carrspaints

My tax code is 1026L. I assume that is what you are asking? Not sure how I get the BIK value of a tax code. Although it would include BIK, it could also include previous tax underpayment I guess. (I have no previous tax payment shortfalls though)

Dazed_and_C0nfused

You can check how your tax code is make up by looking at your Personal Tax Account on gov.uk.

carrspaints

Okay, I have logged into HMRC. Not sure if I am looking in the right place or providing you the correct data, but under my tax code it shows my Personal Allowance as £12,570, with just one deduction for company vehicle @ £2,304. That leaves £10,266

[Deleted User]

carrspaints said:

Okay, I have logged into HMRC. Not sure if I am looking in the right place or providing you the correct data, but under my tax code it shows my Personal Allowance as £12,570, with just one deduction for company vehicle @ £2,304. That leaves £10,266

So your taxable income is 40506 plus 2304 which is 42810.