Transfer of unused personal allowance to partner.

benny5

With the freezing of the personal allowance tax thresholds, I have just discovered that, were previously I could claim for all my spouse’s unused personal allowance (£1260), however, with the increase in SP this has now dropped below that level for the tax year 2024/25.

Do I wait for the year end or must this be declared now?

eskbanker

The scheme works on the basis of transferring a fixed amount of £1260 worth of tax allowance, and isn't related to how much is actually 'unused':

https://www.gov.uk/marriage-allowance

benny5

eskbanker said:

The scheme works on the basis of transferring a fixed amount of £1260 worth of tax allowance, and isn't related to how much is actually 'unused':

https://www.gov.uk/marriage-allowance

Appreciate that.

My simple take on it was, the difference between income and the current personal allowance £12570.

E.G. spousal income of £11000, max transfer £1260. Income £12000 max transfer £260.

p00hsticks

benny5 said:

eskbanker said:

The scheme works on the basis of transferring a fixed amount of £1260 worth of tax allowance, and isn't related to how much is actually 'unused':

https://www.gov.uk/marriage-allowance

Appreciate that.

My simple take on it was, the difference between income and the current personal allowance £12570.

E.G. spousal income of £11000, max transfer £1260. Income £12000 max transfer £260.

It's £1260 or nothing. You'll get the benefit of the full additional £1260 allowance, but your spouse will end up paying tax where they wouldn't have if they hadn't made the transfer. As a couple you'll be better off overall with the transfer, but there will be an individual winner and loser. 

Dazed_and_C0nfused

benny5 said:

eskbanker said:

The scheme works on the basis of transferring a fixed amount of £1260 worth of tax allowance, and isn't related to how much is actually 'unused':

https://www.gov.uk/marriage-allowance

Appreciate that.

My simple take on it was, the difference between income and the current personal allowance £12570.

E.G. spousal income of £11000, max transfer £1260. Income £12000 max transfer £260.

I don't know where you've got that idea from.  Marriage Allowance isn't about a transfer of spare/unused Personal Allowance.

It's a fixed amount and you don't need to have any spare/unused allowances to be eligible in the first place.  Providing you aren't liable to higher rate tax you are eligible.  Although often there wouldn't be any benefit in applying if you didn't have any spare allowances.  But it can still be worthwhile in some instances where the 0% tax bands come into play.

If your spouse has earnings or pension income of £12,000 then they will have a tax liability of £138.

If you can benefit in full from the Marriage Allowance credit you will be £252 better off.

So as a couple you are still saving £114.

It might help household harmony if you pay your spouses tax bill 😉

benny5

Dazed_and_C0nfused said:

benny5 said:

eskbanker said:

The scheme works on the basis of transferring a fixed amount of £1260 worth of tax allowance, and isn't related to how much is actually 'unused':

https://www.gov.uk/marriage-allowance

Appreciate that.

My simple take on it was, the difference between income and the current personal allowance £12570.

E.G. spousal income of £11000, max transfer £1260. Income £12000 max transfer £260.

I don't know where you've got that idea from.  Marriage Allowance isn't about a transfer of spare/unused Personal Allowance.

It's a fixed amount and you don't need to have any spare/unused allowances to be eligible in the first place.  Providing you aren't liable to higher rate tax you are eligible.  Although often there wouldn't be any benefit in applying if you didn't have any spare allowances.  But it can still be worthwhile in some instances where the 0% tax bands come into play.

If your spouse has earnings or pension income of £12,000 then they will have a tax liability of £138.

If you can benefit in full from the Marriage Allowance credit you will be £252 better off.

So as a couple you are still saving £114.

It might help household harmony if you pay your spouses tax bill 😉

My very simple view (incorrect as it transpires) was that I was utilising my OH unused allowance.

With her SP now just a fraction under £12000 it prompted the tax liability issue.