Marraige Allowance Eligibility

PensionPusher

Although my annual salary falls well into the higher rate tax payer bracket,  I have been maximising personal pension contributions over the past few years resulting in total earnings after deduction of pension fund and gift aid contributions, of marginally below the higher rate tax band.  My wife is not working.  Would we be eligible for marraige tax allowance (as long as I am able to maintain the required additiona pension fund contribution to avoid paying higher rate tax)? 

Dazed_and_C0nfused

Pension contributions and Gift Aid payments don't usually reduce your taxable income.

Do you mean your basic rate band has been increased because of them?

But if you aren't a higher rate payer then apart from a niche situation involving dividend income then yes you would be eligible.

Providing she isn't liable to higher rate tax then your wife would be eligible to apply (it is the person agreeing to have a lower Personal Allowance who applies).

Andy_L

Its based on your income before tax/deductions, normal pension contributions don't reduce your income so won't count. They might if they were via salary sacrifice since that does reduce your income

Dazed_and_C0nfused

Andy_L said:

Its based on your income before tax/deductions, normal pension contributions don't reduce your income so won't count. They might if they were via salary sacrifice since that does reduce your income

But Marriage Allowance eligibility isn't based on your taxable income, it's which tax rates you are liable at.

So increasing your basic rate band via RAS pension contributions can stop you being a higher rate payer despite earning say £70k

3nigma

Marraige tax allowance is based on your earnings. I'm trying to determine the definition and what qualifies as earnings. If you're earning £55k and have pension contributions of £5.5k, would I qualify for Marriage tax allowance as my earnings is below £50k threshold?

Dazed_and_C0nfused

3nigma said:

Marraige tax allowance is based on your earnings. I'm trying to determine the definition and what qualifies as earnings. If you're earning £55k and have pension contributions of £5.5k, would I qualify for Marriage tax allowance as my earnings is below £50k threshold?

Marriage Allowance eligibility isn't based on earnings at all.  It's based on which tax rate you are liable.

If you are liable to higher rate tax or would be liable to higher rate tax if it weren't for the dividend nil rate band (aka Dividend Allowance) then you aren't eligible.

And a lot of pension contributions don't reduce taxable income.  Although they do increase the basic rate band.

What method so you use to put money into your pension?

Net pay

Relief at source
Salary sacrifice