Marriage allowance and savings tax.

WhyohWhy

Hi,

I am hoping somebody can help, I have been trying to find out how the marriage allowance affects tax on savings.

I have transferred the marriage allowance to my husband for several years.  I decided to take my pension early, last July, which will take me over the personal allowance but the HMRC will not be changing this until the new financial year.  I am self employed and usually earn about 10k and my pension will be just shy of 7k.  

My self employed income this year will be £9500 + Pension of £6934 and I will have a minimum of £1655 of interest from savings.  The income total is £16434 which is below the £17570 but my question, is this reduced by the marriage allowance to £16310?  Can anyone help me out with how much tax I will pay?  At the moment I am planning to keep my husbands interest below 1k to avoid tax but if I will be paying tax anyway I won't need to bother.  Would it be worth me earning less from self employment?  

Any help would be gratefully received.
Thanks.

eskbanker

£16,434 earned income from employment and pension exceeds your reduced £11,310 personal allowance by £5,124, so tax on that will be about £1,024.

You'll still have your £1K personal savings allowance to apply to your interest income, so £655 taxable would come to £131.

Dazed_and_C0nfused

WhyohWhy said:

Hi,

I am hoping somebody can help, I have been trying to find out how the marriage allowance affects tax on savings.

I have transferred the marriage allowance to my husband for several years.  I decided to take my pension early, last July, which will take me over the personal allowance but the HMRC will not be changing this until the new financial year.  I am self employed and usually earn about 10k and my pension will be just shy of 7k.  

My self employed income this year will be £9500 + Pension of £6934 and I will have a minimum of £1655 of interest from savings.  The income total is £16434 which is below the £17570 but my question, is this reduced by the marriage allowance to £16310?  Can anyone help me out with how much tax I will pay?  At the moment I am planning to keep my husbands interest below 1k to avoid tax but if I will be paying tax anyway I won't need to bother.  Would it be worth me earning less from self employment?  

Any help would be gratefully received.
Thanks.

I get it to be £1,155.80.

The above assumes you aren't Scottish resident and the £9,500 self employed income is your taxable profit figure.

Note that if you don't pay any tax under PAYE (quite possible) then you should find you have some payments on account to pay for 2025-26 as well as the Balancing Payment for 2024-25.

WhyohWhy

So then there is no benefit in keeping my income down for the starting rate for savings then?   

eskbanker

WhyohWhy said:

So then there is no benefit in keeping my income down for the starting rate for savings then?   

No obvious reason to do that, no - why would you prefer less income?

Dazed_and_C0nfused

WhyohWhy said:

So then there is no benefit in keeping my income down for the starting rate for savings then?   

If your profit was only £8,721 then all your interest would be taxed at 0%.

And your total tax liability would be £869.

So you do fall into the odd situation where even as a relatively low income person some of the income is effectively taxed at 40%.

WhyohWhy

Because I don't really need it.  I can restart my business a few weeks later than normal after my winter break.  I was just worried that I was potentially paying tax when I didn't need to.  I was reading about the 5k starting rate of tax being reduced for every pound you earn over the tax allowance but If your total income was below it you paid no tax at all.  I'm very confused tbh. 

Dazed_and_C0nfused

WhyohWhy said:

Because I don't really need it.  I can restart my business a few weeks later than normal after my winter break.  I was just worried that I was potentially paying tax when I didn't need to.  I was reading about the 5k starting rate of tax being reduced for every pound you earn over the tax allowance but If your total income was below it you paid no tax at all.  I'm very confused tbh. 

Your post probably crossed my second one.

You could avoid a wedge of tax with lower profits.  But would the lower profits cause you any financial difficulties (outside the tax position).

WhyohWhy

I was also reading the HMRC don't consider the marriage allowance with the starting rate of tax but its not clear if that means you get the full £12570 + £5000 + £1000 or it's £11310 + £5000 + £1000.  If you have been given a marriage allowance by your partner the starting rate of tax on savings doesn't go up to £13830 + £5000 + £1000....or does it.  I don't seem to be able to find the definite answer.

Dazed_and_C0nfused

WhyohWhy said:

I was also reading the HMRC don't consider the marriage allowance with the starting rate of tax but its not clear if that means you get the full £12570 + £5000 + £1000 or it's £11310 + £5000 + £1000.  If you have been given a marriage allowance by your partner the starting rate of tax on savings doesn't go up to £13830 + £5000 + £1000....or does it.  I don't seem to be able to find the definite answer.

Marriage Allowance works differently for each person

The applicant has a reduced Personal Allowance (£11,310 in the current tax year) and the recipient has the normal Personal Allowance (£12,570 in the current tax year) but gets £252 'knocked off their tax liability.

Receiving Marriage Allowance has no impact at all on the savings starter rate band.

WhyohWhy

Ok thanks.