State Pension, Marriage Allowance & Tax Implications

Bellypork911

I'm 70 & receive both a State Pension & company pension, & my wife also receives a State Pension, but she has no additional income. A few years ago she transferred £1000 of her tax allowance to me, to reduce my tax liability. How does that work now? Does that £1000 off her tax allowance disadvantage her (or me) now? Is it possible to transfer the £1000 back to her tax allowance? All a bit confused!

MeteredOut

You can get her to cancel the transfer and the allowance will move back to her, so she gets the full allowance.

Assuming this is relating to the "not taxed if only income is a state pension" discussion, you'll need to do your own number crunching based on your own incomes (eg, you don't say which state pension she gets or how much she gets) to determine if you're better off keeping the marriage allowance. 

I suspect someone will put a calculator online well in advance of you having to make the decision for the 2027/28 tax year. But, until the actual policy is published, you may be premature in making a decision now.

dever33

It works only if your wife stays under the personal allowance. Since her only income is the State Pension, she does not lose anything by transferring part of her allowance to you. It reduces your tax bill and does not affect her payments.

You can ask HMRC to stop the transfer if you both prefer that. It can be changed for future years through your personal tax account or by calling them.

MeteredOut

dever33 said:

It works only if your wife stays under the personal allowance. Since her only income is the State Pension, she does not lose anything by transferring part of her allowance to you. It reduces your tax bill and does not affect her payments.

You can ask HMRC to stop the transfer if you both prefer that. It can be changed for future years through your personal tax account or by calling them.

Are you talking about this year, or post 2027/28?

No-one can confirm today that someone who only receives the new state pension in the 2027/28 tax year, but has transferred £1260 of their personal allowance to a spouse, will not pay tax for that year. That would be a clear loop-hole to what has been quasi-announced that I'm sure will be disallowed.

af1963

As a couple, you will be no worse off by transferring the allowance to you, and possibly better off by saving a little of your tax.

As an individual, it's possible that she is slightly worse off, if her pension is greater than her remaining tax allowance.