Tax, Pensions and transferring of Allowance

AyJaydee

When I worked, I remember that part of my wife's tax free allowance was transferred to me, since I earned the higher amount.
Well now both of us have been retired for 2+ years and both claiming the full New State Pension.  We both also receive private pensions, although my total income is still higher than my wife's, but still in the basic (20%) tax band.
Because the State Pension mops up almost all of the Tax Free Allowance, I pay 20% tax on almost all of my private pension and my tax code appears to be correct.
My wife had a similar tax code to mine, 115L, and was taxed accordingly on her private pension. Suddenly, her tax code drops to about half that (56L, or close) and the tax on her private pension has shot up, so her pension has gone down.

Having spoken to the HMRC helpline, she says that I need to fill in a form to transfer allowance to her.  I looked at the HMRC website and I think she heard wrong and got it the wrong way round. It says that allowance is transferred from the person with the smaller income, to the person with the larger income.

My question is, now that we are both retired, is there now any overall benefit in transferring allowance from one to the other?

Thank you

Mark_d

To benefit the lower earner would have to earn less than the personal allowance - £12570.  It sounds like this is not the case for you

Dazed_and_C0nfused

AyJaydee said:

When I worked, I remember that part of my wife's tax free allowance was transferred to me, since I earned the higher amount.
Well now both of us have been retired for 2+ years and both claiming the full New State Pension.  We both also receive private pensions, although my total income is still higher than my wife's, but still in the basic (20%) tax band.
Because the State Pension mops up almost all of the Tax Free Allowance, I pay 20% tax on almost all of my private pension and my tax code appears to be correct.
My wife had a similar tax code to mine, 115L, and was taxed accordingly on her private pension. Suddenly, her tax code drops to about half that (56L, or close) and the tax on her private pension has shot up, so her pension has gone down.

Having spoken to the HMRC helpline, she says that I need to fill in a form to transfer allowance to her.  I looked at the HMRC website and I think she heard wrong and got it the wrong way round. It says that allowance is transferred from the person with the smaller income, to the person with the larger income.

My question is, now that we are both retired, is there now any overall benefit in transferring allowance from one to the other?

Thank you

Marriage Allowance can no longer be in place if she has an L suffix tax code.

sheramber

The personal allowance is 12570 - giving code 1257l

If your wife transfered 10% of her allowance to you  her  personal allowance would be reduced to 11130 - code 1110 followed by the letter N

Your alloowances would increase your code number by 11130 to 11830 i - code 1183 followed by the letter M.

you can check how your code number is arrived by in your person tax account in the Government Gateway.

As your wife has L after her code number she has not transferred marriage apllownace to you  

If your wife has full personal allowance of 12570 that will be reduced to cover her state pension, which is paid without deduction of tax.

In receipt of  a new state pension of  11973 you deduct that  from 12570 to leave 597 - code 59L

AyJaydee

This is the problem with something that appears to change each time I look at it.
It would seem that the figures are correct.  My State pension went up, eating deeper into how much tax free allowance remained and so reducing my tax code from 115L to 60L and thereby the tax increase ate into the Private pension increase. In all, I gained about £9.80 a week.
My Wife's situation followed the same pattern, except her State pension is a few pounds less than mine. Hence her tax code is 65L and she gained a generous £8.43 a week.  
As for the transference of allowance, I think that was down to either poorly explained, or badly heard.
It was good to get it off my chest. Pity the increase will barely scratch the rise in living costs