Will I still be able to benefit from my wife transferring 10% of her tax allowance to me

fearbeag

For several years now I have benefited from my wife transferring 10% of her Personal allowance. to me. Therefore, her personal allowance is £12,570 minus £1260  which is £11,310. From April her state pension rises to £9,408 which still leaves a difference of £1902 (£11,310 minus £9,408) However.....Her small private pension will be £1,978.00 a year which means she will pay tax on the difference i.e. £76.00 @ 20% .a mere £15.20 a year. My question therefore is this, because of her transferring 10% of her allowance to me coupled with her increase in state pension ( together with a freeze on Tax free personal allowance) will she now be considered a tax payer and make her ineligible to pass her allowance over to me. If it does it is very unfair as  jointly, she will benefit to the tune of £15.20 a year and I will lose out to the tune of £260.00 per year.

Dazed_and_C0nfused

fearbeag said:

For several years now I have benefited from my wife transferring 10% of her Personal allowance. to me. Therefore, her personal allowance is £12,570 minus £1260  which is £11,310. From April her state pension rises to £9,408 which still leaves a difference of £1902 (£11,310 minus £9,408) However.....Her small private pension will be £1,978.00 a year which means she will pay tax on the difference i.e. £76.00 @ 20% .a mere £15.20 a year. My question therefore is this, because of her transferring 10% of her allowance to me coupled with her increase in state pension ( together with a freeze on Tax free personal allowance) will she now be considered a tax payer and make her ineligible to pass her allowance over to me. If it does it is very unfair as  jointly, she will benefit to the tune of £15.20 a year and I will lose out to the tune of £260.00 per year.

You have (understandably because of poor information on gov.uk) misunderstood the rules for Marriage Allowance.

Your wife will only become ineligible once she is a higher rate payer.  She can continue to receive the reduced Personal Allowance and pay a small amount of tax if she wishes, there is nothing to prevent that.

You may wish to put £15.20 her way to soften the blow.  You'll still be nearly £240 better of than if Marriage Allowance didn't exist 😉

fearbeag

Dazed_and_C0nfused said:

fearbeag said:

For several years now I have benefited from my wife transferring 10% of her Personal allowance. to me. Therefore, her personal allowance is £12,570 minus £1260  which is £11,310. From April her state pension rises to £9,408 which still leaves a difference of £1902 (£11,310 minus £9,408) However.....Her small private pension will be £1,978.00 a year which means she will pay tax on the difference i.e. £76.00 @ 20% .a mere £15.20 a year. My question therefore is this, because of her transferring 10% of her allowance to me coupled with her increase in state pension ( together with a freeze on Tax free personal allowance) will she now be considered a tax payer and make her ineligible to pass her allowance over to me. If it does it is very unfair as  jointly, she will benefit to the tune of £15.20 a year and I will lose out to the tune of £260.00 per year.

You have (understandably because of poor information on gov.uk) misunderstood the rules for Marriage Allowance.

Your wife will only become ineligible once she is a higher rate payer.  She can continue to receive the reduced Personal Allowance and pay a small amount of tax if she wishes, there is nothing to prevent that.

You may wish to put £15.20 her way to soften the blow.  You'll still be nearly £240 better of than if Marriage Allowance didn't exist 😉

Thank you very much. I now fully understand.

molerat

MrsM has been paying tax for a few years now but the joint benefit has been gradually reducing over that time.  Next year she will move from being a 19% tax payer to 20% and the benefit has reduced to less than £10 so we have decided to ditch the transfer. The extra £1260 of tax free interest is going to be more useful as I will need to shift some savings to her.