Marriage allowance taxable income

Havent_got_a_clue

Hi

we had previously assumed we were not eligible for marriage tax relief as one of us earns over £50,000. 

Having read a few posts on here I am wondering if we have this wrong as we make significant pension contributions, and therefore pay little, if any, 40% tax.

I’d be very grateful if someone could advise which figures we use as the HMRC websites asks “does your partner earn between £12571 and £50270?” The answer to which is no, but if we are talking taxable pay then salary minus pension (RAS) is around £50000


Can anyone please advise if we might be eligible? 

Many thanks

Dazed_and_C0nfused

It's being a higher rate payer which prevents you from being eligible.

Also, RAS pension contributions don't reduce your taxable income.  They increase your basic rate tax band, meaning more income can be taxed at 20% and less (or none) at 40%.

r6mile

I have been in exactly the same situation, and from my understanding there is a v big difference between

"pay little, if any, 40% tax." If you pay any 40% tax - even if £1 - then you are a higher-rate taxpayer and not eligible. If you do not, then you can apply. If you are very close to the threshold, then making additional pension contributions seems worthwhile. Given the tax year is ending v soon you may want to do the sums and get on it though!

Jeremy535897

The acid test is whether your adjusted net income exceeds the basic rate threshold of £50,270. A salary of £56,261, interest of £10, and a gross pension contribution of £6,000 would mean that your adjusted net income was £50,271. Even though the tax on the £10 interest is nil, you cannot receive the benefit of the marriage allowance in these circumstances. For the definition of adjusted net income, see:
https://www.gov.uk/guidance/adjusted-net-income

Havent_got_a_clue

Thank you for taking time to reply.

I had always thought that we were not eligible as you say, and perhaps I am being dim, but I recently read a thread on this forum from someone trying to work out how much tax they had overpaid. Their starting point was a salary of approx £62000 and then they paid into a SIPP for tax efficiency and also for child benefit.
It was suggested that they might also qualify for marriage tax relief and it got me wondering….

To flesh it out, for 21/22 tax year we earned the following-
INCOME 1:
PAYE-  62240
BIK (PMI) 2035
PENSION direct to SIPP -14500 (after RAS)
GIFT AID  -75
SAVINGS INTEREST- 29
TAX CODE1762m1 (this was adjusted after claiming tax back in a previous year)

INCOME 2:
PAYE- 9659
PENSION- 502 (Sal sac)
SAVINGS INTEREST- 29 
child benefit 1099.80
tax code- 1257l 

Do these figures change anything? We did have to pay some tax back after self assessment but I assumed that was because the tax code was inaccurate?
 
Retirement is on the horizon so every penny is being accounted for.

Again, thanks for replying.

Havent_got_a_clue

sorry, I it took my so long to type my last message that I didn’t see the other replies.

Thank you all, I’m going to digest all the info and then check last years self assessment when I get chance this evening.

Havent_got_a_clue

Hi I’m revisiting this before tax year end…

I am pretty confident that adjusted net income for last year is below £50000 (and this year too, if I get my pension input right)

Please could somebody sense check the figures I posted above and let me know if I am correct.

I looked at the HMRC application process which asks does your partner earn between £12571 and £50270 before tax?
This put us off applying as doesn’t this mean your gross pay ie, what your company pays you?
 

Dazed_and_C0nfused

Havent_got_a_clue said:

Hi I’m revisiting this before tax year end…

I am pretty confident that adjusted net income for last year is below £50000 (and this year too, if I get my pension input right)

Please could somebody sense check the figures I posted above and let me know if I am correct.

I looked at the HMRC application process which asks does your partner earn between £12571 and £50270 before tax?
This put us off applying as doesn’t this mean your gross pay ie, what your company pays you?
 

Your income has no relevance for Marriage Allowance purposes.

It is the tax rates you are liable at which is key.

If you don't pay higher rate tax, and wouldn't do if the dividend nil rate band was ignored, then you are eligible.  Either to apply for or receive Marriage Allowance.

Gov.uk tends to dumb things down.  This is a better source.  In particular see the example of John if you have any taxable dividend income.

https://www.litrg.org.uk/tax-guides/tax-basics/what-tax-allowances-am-i-entitled#toc-what-is-the-marriage-allowance-transferable-tax-allowance-for-married-couples-and-civil-partners-

Havent_got_a_clue

Thank you so much for the explanation and the link. Makes more sense- much appreciated.
I don’t understand a thing about dividends though  as the only stocks and shares we have are uncrystallised within funds in pensions. Could we be impacted unknowingly? 

Something else to add to my bedtime reading list.

As a little aside, would you happen to understand why my husbands tax code was 1237l last year? He does not have any BIK.

This year it is 1253L and it says this is due to £29 untaxed savings.  Previously he claimed for  non taxable mileage but not this year. 

Is this how the savings allowance works? He earns approx £10000 after pension salary sacrifice.  I’m assuming this still allows for £1257 transfer of marriage tax allowance. 

Dazed_and_C0nfused

Havent_got_a_clue said:

Thank you so much for the explanation and the link. Makes more sense- much appreciated.
I don’t understand a thing about dividends though  as the only stocks and shares we have are uncrystallised within funds in pensions. Could we be impacted unknowingly? 

Something else to add to my bedtime reading list.

As a little aside, would you happen to understand why my husbands tax code was 1237l last year? He does not have any BIK.

This year it is 1253L and it says this is due to £29 untaxed savings.  Previously he claimed for  non taxable mileage but not this year. 

Is this how the savings allowance works? He earns approx £10000 after pension salary sacrifice.  I’m assuming this still allows for £1257 transfer of marriage tax allowance. 

That is because the interest is using some of his spare Personal Allowance.

If he didn't have any spare Personal Allowance then the interest (when small enough) would be taxed at the savings starter rate of 0% 😊.  And wouldn't be shown in his tax code.

sheramber

Havent_got_a_clue said:

Thank you so much for the explanation and the link. Makes more sense- much appreciated.
I don’t understand a thing about dividends though  as the only stocks and shares we have are uncrystallised within funds in pensions. Could we be impacted unknowingly? 

Something else to add to my bedtime reading list.

As a little aside, would you happen to understand why my husbands tax code was 1237l last year? He does not have any BIK.

Does he have a notice of coding for last year/ That would show how the tax code was arrived at.