Interest & Marriage Allowance

Dazed_and_C0nfused

Doctor_Who said:

Dazed_and_C0nfused said:

susanann_2 said:

Thanks everyone I think I’ve finally got it now. Recipient of the marriage allowance gets £252 off their tax bill as a basic rate taxpayer. My personal allowance after giving the marriage allowance to my husband has a personal allowance of 11310 + 5000 + 1000 in that order. 

Not quite.

If you have applied for Marriage Allowance then the only allowance you will have is the reduced Personal Allowance of £11,310.

Any income above that will be taxed.

But the first £7,000 can potentially all be taxed at various 0% tax rates

£5,000 from the savings starter rate
£1,000 from the savings nil rate
£1,000 from the dividend nil rate

For the majority of people it makes no difference but in some more unusual situations having that income taxed at 0% can add a significant amount to your overall tax liability.

Anyone taking a State Pension deferal lump sum would be deemed a basic rate payer and have to pay 20% tax on their entire lump sum despite not actually paying any tax on their other taxable income.

The subtle, but important difference between 'allowance' and '0% tax rate'. HMRC don't help with terms like 'Personal Savings Allowance' and 'Dividend Allowance'.

Very true!