Marriage Tax Allowance change of circumstances

in Cutting tax
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rodp_2rodp_2 Forumite
28 Posts
Part of the Furniture 10 Posts Combo Breaker
Hi All,

I've been reading around marriage tax allowance but my questions remain unanswered.  The scenarios are:

I am a (highish) basic tax payer and my wife is a non tax payer - let's say £10K.  My wife has transferred her allowance to me and it's been like this for a number of years. 

What happens when:

1)  I remain on the same salary but my wife's salary increases and she starts to pay tax.  Will HMRC take away the marriage tax allowance automatically and when?

2) I receive a bonus in Feb (ie close to the tax year end) which just pips me over into the higher tax rate, say by £500 but my wife remains a non tax payer.  Will HMRC take away the marriage tax allowance automatically (or do they wait until the end of the tax year giving you a chance to increase your salary sacrifice for the last month hopefully mitigating / reducing the overall taxable income?

Some other questions:
3) In the case of #1 if we don't have to give up the M code I believe it's still beneficial to transfer it to me as my salary is higher and my wife's salary is only just over the threshold of paying tax?  Is that correct?

4) In the case of #2 what happens if it's just the bonus which pips you over to the higher tax band rate for one year but say the bonus is then withdrawn the following year - will HRMC look back at past income making it hard to prove that the bonus won't happen in the current year?

5) To mitigate the possibility of our tax status changing, I'm aware that I could increase my salary sacrifice into my pension, donate to charity and likewise my wife could do that too. As time goes by it's inevitable that both salaries will increase but at what point should I not bother trying to stay in the basic tax rate and have the M code?  What's the calculation to work this out?

Thanks in advance



  • edited 13 July 2022 at 7:17AM
    Dazed_and_C0nfusedDazed_and_C0nfused Forumite
    9.8K Posts
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    edited 13 July 2022 at 7:17AM
    1.  No, you are both still eligible

    2.  Yes but it happens after the end of the tax year not by an immediate change to your tax code.  You would owe ~£500

    3.  Do you mean your wife will be earnings just above her current Personal Allowance (£11,310) or above the normal Personal Allowance (£12,570)?

    4.  If HMRC identify you as a higher rate payer and cancel Marriage Allowance (from the year you are higher rate) then your wife would need to apply again if you wanted it to apply in a later tax year.

    5.  Your wife donating to charity is highly unlikely to make any difference to her eligibility for Marriage Allowance.  Unless her income is going to jump massively to £50k+.  And her donating wont impact your tax liability.  If anything she would give herself a higher tax liability as a non taxpayer has to pay the tax relief the charity claims.  So if she donated say £200 (net) under the Gift Aid scheme HMRC would send her a bill for £50.

    Ultimately the worst case scenario (ignoring Gift Aid complexities) is usually that she pays £252 more tax than she needs to.  And you pay £252 less.  So as a couple it is neutral. 
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