Marriage Allowance and Savings

FabulousFarmer

I earn approx £10,500 (from a pension) and my husband earns around £15,000. I am looking at whether it is worth transferring the marriage tax allowance to my husband. This is because I also earn about £2,000 from savings and dividends, taking my total income to around £12,500. I know those on lower incomes get an extra tax-free allowance of up to £5,000 for their savings, but I am unsure how this extra allowance works with the Marriage Tax Allowance. I have read previous threads on this topic and looked at the GOV website and I am still unsure as to whether, if I transferred the allowance, the £2,000 from savings and dividends would then result in me paying tax. Any advice would be very much appreciated.

Dazed_and_C0nfused

FabulousFarmer said:

I earn approx £10,500 (from a pension) and my husband earns around £15,000. I am looking at whether it is worth transferring the marriage tax allowance to my husband. This is because I also earn about £2,000 from savings and dividends, taking my total income to around £12,500. I know those on lower incomes get an extra tax-free allowance of up to £5,000 for their savings, but I am unsure how this extra allowance works with the Marriage Tax Allowance. I have read previous threads on this topic and looked at the GOV website and I am still unsure as to whether, if I transferred the allowance, the £2,000 from savings and dividends would then result in me paying tax. Any advice would be very much appreciated.

Based on what you have posted if you applied some of your interest would be taxed, but at a 0% tax rate.

Have a look at LITRG's website, they have good explanations for this type of situation.

eskbanker

Assuming your husband is paying tax on some of that £15K, it'll make sense for you to transfer the £1260 marriage allowance to him, as you'd still be able to benefit from the £5K starting rate for savings and the £1K personal savings allowance.

molerat

You can currently earn £12570 - £10500 = £2070 + £5000 + £1000 = £8070 in interest without paying tax.

If you transfer 10% of your allowance to your spouse you can earn £11310 - £10500 = £801 + £5000 + £1000 = £6801 in interest without paying tax plus your spouse will pay £252 less in tax.

Even if your pension creeps above the £11310 allowance it is probably still worth keeping the marriage allowance running as although you will receive a small tax bill your spouse will be £252 better off so still better off as a couple.