Tax confusion

caromary1056

sheramber said:

Marriage Allowance transfer does not give you extra personal allowances.

It gives you a credit of £252 deducted from your tax liability.

You work out your liability  without it then deduct £252 from that total if you are entitled to it.

You must be liable to  basic ratre tax only before Marriage Transfer Allowance is claimed.



It is shown as increased personal allowance in your tax code to facilitate the correct tax being deducted.

Thank you. Yes it is shown as increased personal allowance in my tax code. I’m a bit confused with the £252 deduction 

caromary1056

TheSpectator said:

Speak to a tax advisor as you are just not getting it.

Thank you, you are quite correct I am struggling with this. I’ve rang a few advisors and am happy to pay for the advice but they don’t get back to “little fish” like me unfortunately 

caromary1056

[Deleted User] said:

caromary1056 said:

Thank you for all the help and time from all your posts to me, I have concluded this, please kindly review and let me know if this sounds about right please. Thanks again.                            salary: £60,000 - Car allowance: £5,610 - Company pension: £17,027.92 - Less salary sacrifice (holiday buy): -£923.28 Total income: £81,714.64                                           Allowances: - Personal allowance: £12,570 - Married Couple’s Transfer: £1,260 Total allowance: £13,830                                    Taxable Income: £81,714.64 – £13,830 = £67,884.64                                                         To reduce this to £50,270, need to lower my taxable income by: £67,884.64 – £50,270 = £17,614.64                                                              I would need to contribute approximately £17,615 per year into a salary sacrifice pension to stay within the 20%….

No - you have included the personal allowance twice - once by deducted it from the income and also by including it in the £50270. 

Your income is £81714

This is £31444 into higher rates - salary sacrifice amount required. 

Thank you, I’ll have another go as I hadn’t realised I’d doubled the personal allowance 

Dazed_and_C0nfused

caromary1056 said:

sheramber said:

Marriage Allowance transfer does not give you extra personal allowances.

It gives you a credit of £252 deducted from your tax liability.

You work out your liability  without it then deduct £252 from that total if you are entitled to it.

You must be liable to  basic ratre tax only before Marriage Transfer Allowance is claimed.



It is shown as increased personal allowance in your tax code to facilitate the correct tax being deducted.

Thank you. Yes it is shown as increased personal allowance in my tax code. I’m a bit confused with the £252 deduction 

A tax code is just a mechanism to try and deduct the correct amount of tax during the year.

So to give you the benefit of Marriage Allowance during the year, and not have to wait till the tax year has ended, HMRC give you extra tax code allowances for Marriage Allowance.  That is the extra £1,260.

But in reality Marriage Allowance is a "tax reducer", it entitles you (if you are eligible) to a reduction of £252 off your tax liability.  You are not entitled to an increased Personal Allowance.

£252 being the £1,260 x basic rate of tax (20%).

There is a decent explanation here, especially the Mechanics section

https://www.litrg.org.uk/tax-nic/income-tax/tax-allowances/marriage-allowance-transferable-tax-allowance

TheSpectator

My advice would be ignore the married allowance when doing your calculation - you need to be a basic rate taxpayer to get it so do not include it.

Also try not to complicate things when adding on car allowance, deducting holidays - the important figure is your taxable pay that is reported on your payslip each month. 

[Deleted User]

caromary1056 said:

TheSpectator said:

Speak to a tax advisor as you are just not getting it.

Thank you, you are quite correct I am struggling with this. I’ve rang a few advisors and am happy to pay for the advice but they don’t get back to “little fish” like me unfortunately 

To be fair - your very first post was pretty accurate if you don’t deduct the 1260 as you did!

caromary1056

TheSpectator said:

My advice would be ignore the married allowance when doing your calculation - you need to be a basic rate taxpayer to get it so do not include it.

Also try not to complicate things when adding on car allowance, deducting holidays - the important figure is your taxable pay that is reported on your payslip each month. 

Ok thank you, I’m over complicating matters. Will revisit the figures and try again and look at the taxable pay on payslip. Is it the taxable gross I look at or the total gross on my payslip? Thanks 

caromary1056

[Deleted User] said:

caromary1056 said:

TheSpectator said:

Speak to a tax advisor as you are just not getting it.

Thank you, you are quite correct I am struggling with this. I’ve rang a few advisors and am happy to pay for the advice but they don’t get back to “little fish” like me unfortunately 

To be fair - your very first post was pretty accurate if you don’t deduct the 1260 as you did!

Thank you, I’m going to revisit the figures and and won’t deduct the 1260

[Deleted User]

caromary1056 said:

TheSpectator said:

My advice would be ignore the married allowance when doing your calculation - you need to be a basic rate taxpayer to get it so do not include it.

Also try not to complicate things when adding on car allowance, deducting holidays - the important figure is your taxable pay that is reported on your payslip each month. 

Ok thank you, I’m over complicating matters. Will revisit the figures and try again and look at the taxable pay on payslip. Is it the taxable gross I look at or the total gross on my payslip? Thanks 

Taxable gross

kaysdee

Is your early retirement pension a DB or DC? If the latter, have you drawn down any taxable element as you may have triggered MPAA.