Marriage Allowance Transfer..

harlings

Dear Anyone,

We’ve both been retired for several years now and our tax is calculated under the HMRC’s PAYE scheme, but I’m struggling to understand the best way to utilise our marriage allowance correctly. 

A few years ago, our savings were in sole and joint names but then I started receiving my company pension and my tax started increasing. When I also started receiving my private pension and state pension, I decided to move all our savings into my wife’s name using her tax code. The reason behind this was that I looked at my income of £36,549 and thought it might be better to use her personal allowance for our savings. 

Then, because she wasn’t paying any tax I followed Martin Lewis’s advice, a few months ago on TV, and decided to move 10% of her allowance over to me backdated to 2019. 

This is roughly what our finances look like…

Myself                                                             Wife

£22,230           Company Pension                  £460,000         Savings (Getting 5% interest

£10,719           State Pension                           £40,000         Cash ISA

  £3,600           Private Pension

£50,000           Premium Bonds

£40,000           Cash ISA

Recently HMRC sent me the following…

Have I made a wrong the decision and if so, what can I do to reduce our Tax bill?

Cheers, Steve

Dazed_and_C0nfused

Your formatting is awful but it looks like you have £460k in cash (non ISA) savings.

If so £12,432 (£13,432 with savings nil rate factored in) looks a bit low but that might be due to timing of when the interest was paid.

Maybe you could confirm if £13,432 was about right for your interest for 2023-24?

And also outline in a clearer way what Income your wife has?

Finally, a minor point but you cannot possibly have done this.  I presume you mean you suggested to your wife she should do it.

Then, because she wasn’t paying any tax I followed Martin Lewis’s advice, a few months ago on TV, and decided to move 10% of her allowance over to me backdated to 2019. 

Keep_pedalling

Your wife has no allowance for you to use. Even if she has no other income the 5% she is getting on the £460k cash savings will be bringing in £23k pa so she should be paying tax.

harlings

My question was, if we have £460K in savings should each savings account be registered in her name or mine. Because I'm already receiving three pensions and she has no income other than the savings accounts in her name?

Sarahspangles

I think you're asking purely from a tax point of view? If the savings aren't jointly-owned then the individual who owns them should hold them. I'll assume they're joint.

Firstly you should both be using your ISA allowance every year so you don't need to pay tax on the savings interest. If you don't have ISAs you have £20k each before 6 April and another £20k after.

Then you each have a personal allowance of £12,570, plus a personal savings allowance of £1,000. If your pension income is below £12,570 you also have a starter savings band of £5,000.

That gives your wife headroom for £18,570 of taxable savings income before she starts to pay tax. For you, it depends how much your pensions come to i.e. whether they're over £12,570. But you almost certainly have at least £1,000 personal savings allowance.

There is an advantage to having at least some savings in a joint account in case something happens to one of you. With joint accounts, the bank or building society reports the interest to HMRC as if it's split 50/50. You have to tell HMRC if you want some other split.

The other easy access home for savings with 'interest' that isn't taxed is premium bonds. The nominal interest rate is 3.8% from April but it's down to luck whether you actually get that. However even if you only got 3% back in prizes, but would otherwise be paying tax on the interest on the savings, that's like a savings account paying 3.75% which isn't far off where interest rates on savings are heading.

sheramber

The amount of your savings is not the important figure .

What you need is the amount of  taxable interest each of you receive.  I

As you are liable to tax you have a saving allowance of £1000, so you can receive £1000 of taxable  interest without paying tax on it.

Your wife has personal allowances and savings allowances available to her.

As she has transferred part of her personal allowance to you she has   11310 left plus 1000 + 5000.= 17310 available against taxable savings interest.  She will pay tax on  anything above that figure.

You will need to work out what  taxable interest you receive from each account and then allocate each account  to you or your wife  as appropriate.

harlings

Thanks to both of you for the information that's much clearer now..
The only other question I have is, does it matter if the savings accounts are in joint names or not for the sake of Taxable interest. If my income from my pensions is £35,000 and my wife has no income, then should I put the saving accounts in her sole name so she uses her personal allowance or not?

Dazed_and_C0nfused

harlings said:

Thanks to both of you for the information that's much clearer now..
The only other question I have is, does it matter if the savings accounts are in joint names or not for the sake of Taxable interest. If my income from my pensions is £35,000 and my wife has no income, then should I put the saving accounts in her sole name so she uses her personal allowance or not?

It is sensible from a tax perspective.

Not so sensible if she spends it on a new Ferrari, new fella or the 2:30 at Cheltenham!

Sarahspangles

harlings said:

Thanks to both of you for the information that's much clearer now..
The only other question I have is, does it matter if the savings accounts are in joint names or not for the sake of Taxable interest. If my income from my pensions is £35,000 and my wife has no income, then should I put the saving accounts in her sole name so she uses her personal allowance or not?

She needs enough savings in her name, so that when the interest is paid this uses up her personal allowance, starter savings band and personal saving allowance. Her personal allowance is lower because she has transferred some to you.

Either of you is going to pay tax at 20% once you’ve used up all your allowances. The advantages of holding savings in joint accounts relate to scenarios where one of you is less able to manage their affairs for example due to illness.