Tax-free savings & the starting savings rate

Dazed_and_C0nfused

snowstormcat said:

Dazed_and_C0nfused said:

snowstormcat said:

Looking for some help please.  FIL recently retired and both he and MIL are below state pension age.  MIL transferred the Marriage Allowance to him whilst he was still working as she does not work.

FIL has pension income of £10,500 and savings interest of £12,500.
MIL puts £2880 into a SIPP each year and has savings interest of £9000.

The cash is tied up in bonds and they are averse to investing.

FIL would like to know if he is still entitled to the Marriage Allowance (this may be transferred back to MIL when she gets her state pension in a few years) and how much tax is he likely to pay.  If I am correct MIL will not have to pay any tax or do a Self Assessment but FIL will.

The principal reason someone still married wouldn't be eligible for Marriage Allowance is being a higher rate taxpayer.

So even if he's Scottish resident for tax purposes FIL is still some way off that at the moment.

But you are correct that he will need to compete a Self Assessment return.  Nearly £10.5k of his income will be taxed with best part of £650 to pay on those figures.  

Unless the interest reaches £10k MIL isn't required to complete a tax return and won't have any liability as all the income is covered by her reduced Personal Allowance.

The SIPP contributions won't have any impact on her personal tax liability.

Many thanks for your reply.  Not Scottish residents.  MIL pays £2880 into a SIPP each year but takes it out again with the tax free amount total £3600 - sorry I didn't make this clear, so does this change anything?

A little bit but nothing material.

It will mean she has total taxable income above her reduced Personal Allowance and be taxed like this,

Pension £2,700*
Interest £9,000
Total taxable income £11,700
Less Personal Allowance £11,310
Income to be taxed £390

£390 x 0% = £0.00 (savings starter rate band)

*I'm assuming you really mean £2,700 income not £3,600

snowstormcat

Dazed_and_C0nfused said:

snowstormcat said:

Dazed_and_C0nfused said:

snowstormcat said:

Looking for some help please.  FIL recently retired and both he and MIL are below state pension age.  MIL transferred the Marriage Allowance to him whilst he was still working as she does not work.

FIL has pension income of £10,500 and savings interest of £12,500.
MIL puts £2880 into a SIPP each year and has savings interest of £9000.

The cash is tied up in bonds and they are averse to investing.

FIL would like to know if he is still entitled to the Marriage Allowance (this may be transferred back to MIL when she gets her state pension in a few years) and how much tax is he likely to pay.  If I am correct MIL will not have to pay any tax or do a Self Assessment but FIL will.

The principal reason someone still married wouldn't be eligible for Marriage Allowance is being a higher rate taxpayer.

So even if he's Scottish resident for tax purposes FIL is still some way off that at the moment.

But you are correct that he will need to compete a Self Assessment return.  Nearly £10.5k of his income will be taxed with best part of £650 to pay on those figures.  

Unless the interest reaches £10k MIL isn't required to complete a tax return and won't have any liability as all the income is covered by her reduced Personal Allowance.

The SIPP contributions won't have any impact on her personal tax liability.

Many thanks for your reply.  Not Scottish residents.  MIL pays £2880 into a SIPP each year but takes it out again with the tax free amount total £3600 - sorry I didn't make this clear, so does this change anything?

A little bit but nothing material.

It will mean she has total taxable income above her reduced Personal Allowance and be taxed like this,

Pension £2,700*
Interest £9,000
Total taxable income £11,700
Less Personal Allowance £11,310
Income to be taxed £390

£390 x 0% = £0.00 (savings starter rate band)

*I'm assuming you really mean £2,700 income not £3,600

Thanks again for replying. She pays in £2880 and gets £3600.  So its £3600 less the £900 tax free amount that would be counted as pension income?  As her taxable income is above £11310 is it still Ok for FIL to have the Marriage Allowance transfer?

Dazed_and_C0nfused

snowstormcat said:

Dazed_and_C0nfused said:

snowstormcat said:

Dazed_and_C0nfused said:

snowstormcat said:

Looking for some help please.  FIL recently retired and both he and MIL are below state pension age.  MIL transferred the Marriage Allowance to him whilst he was still working as she does not work.

FIL has pension income of £10,500 and savings interest of £12,500.
MIL puts £2880 into a SIPP each year and has savings interest of £9000.

The cash is tied up in bonds and they are averse to investing.

FIL would like to know if he is still entitled to the Marriage Allowance (this may be transferred back to MIL when she gets her state pension in a few years) and how much tax is he likely to pay.  If I am correct MIL will not have to pay any tax or do a Self Assessment but FIL will.

The principal reason someone still married wouldn't be eligible for Marriage Allowance is being a higher rate taxpayer.

So even if he's Scottish resident for tax purposes FIL is still some way off that at the moment.

But you are correct that he will need to compete a Self Assessment return.  Nearly £10.5k of his income will be taxed with best part of £650 to pay on those figures.  

Unless the interest reaches £10k MIL isn't required to complete a tax return and won't have any liability as all the income is covered by her reduced Personal Allowance.

The SIPP contributions won't have any impact on her personal tax liability.

Many thanks for your reply.  Not Scottish residents.  MIL pays £2880 into a SIPP each year but takes it out again with the tax free amount total £3600 - sorry I didn't make this clear, so does this change anything?

A little bit but nothing material.

It will mean she has total taxable income above her reduced Personal Allowance and be taxed like this,

Pension £2,700*
Interest £9,000
Total taxable income £11,700
Less Personal Allowance £11,310
Income to be taxed £390

£390 x 0% = £0.00 (savings starter rate band)

*I'm assuming you really mean £2,700 income not £3,600

Thanks again for replying. She pays in £2880 and gets £3600.  So its £3600 less the £900 tax free amount that would be counted as pension income?  As her taxable income is above £11310 is it still Ok for FIL to have the Marriage Allowance transfer?

It depends how she takes the pension but I presume she is creating a new uncrystallised pot each time she contributes so if she then crystallizes the whole lot 25% can be taken as a TFLS and 75% is taxable.

If she is taking £3,600 from an existing pot then she may have already taken the TFLS so the whole £3,600 would be taxable.  Although that wouldn't alter the end result in this scenario.

She really needs to understand what her taxable income is though.

HMRC are only interested in the taxable income.

Until she becomes liable to higher rate tax (or is no longer married) then she will remain eligible for Marriage Allowance.

Needing to have income under the Personal Allowance is a myth perpetuated by gov.uk to try and avoid people making stupid mistakes with Marriage Allowance.  But unless she is liable to higher rate tax the legislation does not prevent her from being eligible.

A married couple each earning £40k are both eligible.

snowstormcat

Dazed_and_C0nfused said:

snowstormcat said:

Dazed_and_C0nfused said:

snowstormcat said:

Dazed_and_C0nfused said:

snowstormcat said:

Looking for some help please.  FIL recently retired and both he and MIL are below state pension age.  MIL transferred the Marriage Allowance to him whilst he was still working as she does not work.

FIL has pension income of £10,500 and savings interest of £12,500.
MIL puts £2880 into a SIPP each year and has savings interest of £9000.

The cash is tied up in bonds and they are averse to investing.

FIL would like to know if he is still entitled to the Marriage Allowance (this may be transferred back to MIL when she gets her state pension in a few years) and how much tax is he likely to pay.  If I am correct MIL will not have to pay any tax or do a Self Assessment but FIL will.

The principal reason someone still married wouldn't be eligible for Marriage Allowance is being a higher rate taxpayer.

So even if he's Scottish resident for tax purposes FIL is still some way off that at the moment.

But you are correct that he will need to compete a Self Assessment return.  Nearly £10.5k of his income will be taxed with best part of £650 to pay on those figures.  

Unless the interest reaches £10k MIL isn't required to complete a tax return and won't have any liability as all the income is covered by her reduced Personal Allowance.

The SIPP contributions won't have any impact on her personal tax liability.

Many thanks for your reply.  Not Scottish residents.  MIL pays £2880 into a SIPP each year but takes it out again with the tax free amount total £3600 - sorry I didn't make this clear, so does this change anything?

A little bit but nothing material.

It will mean she has total taxable income above her reduced Personal Allowance and be taxed like this,

Pension £2,700*
Interest £9,000
Total taxable income £11,700
Less Personal Allowance £11,310
Income to be taxed £390

£390 x 0% = £0.00 (savings starter rate band)

*I'm assuming you really mean £2,700 income not £3,600

Thanks again for replying. She pays in £2880 and gets £3600.  So its £3600 less the £900 tax free amount that would be counted as pension income?  As her taxable income is above £11310 is it still Ok for FIL to have the Marriage Allowance transfer?

It depends how she takes the pension but I presume she is creating a new uncrystallised pot each time she contributes so if she then crystallizes the whole lot 25% can be taken as a TFLS and 75% is taxable.

If she is taking £3,600 from an existing pot then she may have already taken the TFLS so the whole £3,600 would be taxable.  Although that wouldn't alter the end result in this scenario.

She really needs to understand what her taxable income is though.

HMRC are only interested in the taxable income.

Until she becomes liable to higher rate tax (or is no longer married) then she will remain eligible for Marriage Allowance.

Needing to have income under the Personal Allowance is a myth perpetuated by gov.uk to try and avoid people making stupid mistakes with Marriage Allowance.  But unless she is liable to higher rate tax the legislation does not prevent her from being eligible.

A married couple each earning £40k are both eligible.

Thanks again for all your help it's really appreciated - I now have a better understanding so that I can try and explain it all to FIL