Marriage tax transfer

peter57

I have been using this 10% transfer for several years now, but, I get my state pension about July next year, and will just going over my personal threshhold. It seems I can continue next year because, I will not pay tax from April-July, but do I have to cancel in July, or is it left to run for the year, but with penalties against my wife, because part of the year I was over my own tax allowance, although it will mean I will pay more tax from July onwards.

NedS

With the Marriage Allowance, you have transferred 10% of your allowance to your wife. Assuming you both had the standard allowance of £12,570, your wife would now have an increased allowance of £13,830 (£12570 + £1260) and you would have a reduced allowance of £11,310 (£12570 - £1260).

Assuming your wife is still able to fully utilise the increase allowance of £13,830, you do not need to do anything. If your own taxable income is above your reduced allowance of £11,310, then you will pay income tax on the excess, but the tax savings made by your wife will exceed the amount of tax you pay, so overall you (as a couple) will be better off. If your taxable income rises to £12570 or more, at that point you may as well cancel the the Marriage Allowance as it will no longer serve you any benefit.

https://www.gov.uk/marriage-allowance

Dazed_and_C0nfused

peter57 said:

I have been using this 10% transfer for several years now, but, I get my state pension about July next year, and will just going over my personal threshhold. It seems I can continue next year because, I will not pay tax from April-July, but do I have to cancel in July, or is it left to run for the year, but with penalties against my wife, because part of the year I was over my own tax allowance, although it will mean I will pay more tax from July onwards.

Providing neither of you are liable to higher rate tax then becoming liable to tax has no impact on eligibility for Marriage Allowance.

You can contribute to receive the lower Personal Allowance (and pay tax accordingly) and your wife will continue to get the standard Personal Allowance plus a tax deduction worth £252 (at current rates).

If your wife doesn't have sufficient income to make full use of the £252 then it might be worth cancelling it but if she benefits by the full £252 then apart from in unusual situations involving dividends there is really no financial benefit in changing things.

But you may of course prefer to pay less tax.  Depends on whether you view finances individually or jointly 😊