Married Couples Allowance / Starting Rate for Savings

pwe

With the end of the tax year looming, I’m struggling to get a clear understanding of how the Starting Rate for Savings allowance (SRA) works where couple have already taken advantage of the Married Couples Allowance, and I’d be grateful if anyone knows the answer

Ordinarily, the SRA is upto a maximum of £5,000 for those individuals with income below £17,570 (17,570 - 12,570 = 5,000)

But what if my personal allowance is higher than 12,570, because my wife has donated 10% of hers to me, making mine now 13,827

 - does my SRA reduce to 3,743 (17,570 - 13,827 = 3,743)?

And by the same token, does my wife’s SRA remain at 5,000 or is it increased to reflect her now lower personal allowance, 

eg 17,570 - 11,313 = 6,257

In hope

Dazed_and_C0nfused

I'm assuming your really mean Marriage Allowance, not Married Couple's Allowance.

You cannot have a Personal Allowance greater than £12,570 so Marriage Allowance has absolutely no impact for the recipient.  You simply get £252 (£1,260 x 20%) deducted from their income tax liability.

Your wife however has a reduced Personal Allowance of £11,310.  There is no direct impact on the savings starter rate band but if her non savings non dividend income (pension, earnings etc) was say £11,500 then this would have used £190 of her basic rate band meaning her available savings starter rate band would only be £4,810.

Once any available Personal Allowance and savings starter rate band has been used she would have the savings nil rate band to use (another £1,000 interest taxed at 0%).

Dazed_and_C0nfused

pwe said:

Dazed_and_C0nfused said:

I'm assuming your really mean Marriage Allowance, not Married Couple's Allowance.

You cannot have a Personal Allowance greater than £12,570 so Marriage Allowance has absolutely no impact for the recipient.  You simply get £252 (£1,260 x 20%) deducted from their income tax liability.

Your wife however has a reduced Personal Allowance of £11,310.  There is no direct impact on the savings starter rate band but if her non savings non dividend income (pension, earnings etc) was say £11,500 then this would have used £190 of her basic rate band meaning her available savings starter rate band would only be £4,810.

Once any available Personal Allowance and savings starter rate band has been used she would have the savings nil rate band to use (another £1,000 interest taxed at 0%).

Thank you, you’ve certainly clarified my thinking as far as my wife’s allowances are concerned 

However, your saying that it’s not possible to have a personal allowance greater than £12,570 has left me less certain 

Using the Marriage Allowance (thank you, my mistake) my wife has donated 10% of her personal allowance to me, increasing my own personal allowance to £13,827 (as confirmed by my tax code), ie clearly greater than £12,570

As a result, I’m still unclear as to how my increased personal allowance impacts my own nominal £5,000 starting rate allowance entitlement 

You definitely can't have a Personal Allowance greater than £12,570.

You are confusing the Personal Allowance with your tax code allowances.  Which are only ever a provisional attempt to try and ensure you pay the correct tax during the tax year.

The "Mechanics" illustration from LITRG might help you with understanding this.

https://www.litrg.org.uk/tax-nic/income-tax/tax-allowances/marriage-allowance-transferable-tax-allowance

pwe

Dazed_and_C0nfused said:

I'm assuming your really mean Marriage Allowance, not Married Couple's Allowance.

You cannot have a Personal Allowance greater than £12,570 so Marriage Allowance has absolutely no impact for the recipient.  You simply get £252 (£1,260 x 20%) deducted from their income tax liability.

Your wife however has a reduced Personal Allowance of £11,310.  There is no direct impact on the savings starter rate band but if her non savings non dividend income (pension, earnings etc) was say £11,500 then this would have used £190 of her basic rate band meaning her available savings starter rate band would only be £4,810.

Once any available Personal Allowance and savings starter rate band has been used she would have the savings nil rate band to use (another £1,000 interest taxed at 0%).

Thank you.

At first, I was challenged by your saying that it wasn’t possible to have a personal allowance greater than 12,570 because I’d ‘assumed’ that my wife transferring 10% of hers to me would automatically increase mine (above 12,570)

However, having absorbed what you said, and now having properly re-read the relevant HMRC page, you are of course correct, and for this I am most grateful

Best of all, I now know that I’m eligible to the full entitlement of the starting rate for savings allowance, which will somewhat reduce my tax liability 

Thank you again, you’ve been very helpful