Marriage allowance and savings tax.

eskbanker

Just to check - are you making use of ISAs to shelter savings income from taxation?

bilkusg

The discussion above skirts round an important point which interestingly isn't mentioned at all in Martin's main article about marriage allowance transfer ( and maybe should be? )

When you transfer 1260 to your partner, you start paying tax at 11310, and you also start having your tax free savings allowance of £5000 reduced by £1 for every pound you earn above 11310. So if you have enough savings that the remaining allowances don't cover the interest received, you pay 40p more in tax for every pound above 11310 you earn, until the savings allowance is all gone.

On the other hand, when your partner receive the 1260 allowance, that reduces their tax liability by 252, but doesn't increase the threshold at which they start to lose the savings allowance which kicks in at 12570 as before.

The result is that if the lower tax payer earns a bit more than 11310 and has over 6K in savings, the additional tax they pay could be as much as £500, whereas the most the higher tax payer can save is £252. 

So in this ( admittedly rare ) case, the potential consequence of having marriage allowance transfer is significantly greater than in Martin's examples.