New Pension(er) Tax Allowance

malc_b

I can't find any explanation of how this pta works in practice in regards to the marriage allowance and savings income. I have full state pension, some serps and a small private pension so I wouldn't get pta. My wife has full state pension and has transferred marriage allowance to me so we fully use that rather than some going to waste. What happens if she doesn't take allowance back in 2027?

Currently savings are in her name as she has higher savings tax allowance but it seems like that will change in 2027 and we should have savings in my name in order to keep her pta.

molerat

How much interest will she receive ? If the total of her SP and interest will be in excess of £13319 then nothing will change as she is not entitled to the new allowance. It only affects those with incomes below that where interest can reduce the allowance resulting in a tax bill.

Her £1000 PSA is still there and before that the £5000 starting rate for savings is only reduced by the natural erosion of the annual pension increase.

malc_b

That doesn't matter really. The point is that my savings income is either tax free or taxed at 24%. My wife gets hit with 33% tax on savings up to when it wipes out pta, after that she pays no tax up to roughly 5600. Hence the most tax efficient way is to use up my tax free allowances for savings first. I'm never going to get pta so I can't lose. And even after my savings income is taxed it's still less than my wife's rate until savings income is into her tax free area by a good margin so as to bring the average tax rate below 24%.

QrizB

That doesn't matter really.

It does, though.

The point is that my savings income is either tax free or taxed at 24%. My wife gets hit with 33% tax on savings up to when it wipes out pta, after that she pays no tax up to roughly 5600. Hence the most tax efficient way is to use up my tax free allowances for savings first.

If we're talking about £2000-worth of taxable interest, you'll get £1000 taxed at 0% and £1000 taxed at 24%. That's £240 of tax.

Your wife would lose the £94 PTA but wouldn't pay tax on any of the interest. That's £94 of "tax".

Up to about £1392 of interest, you 24% savings tax will be less than the lost PTA. Above that, it won't.

MK62

https://forums.moneysavingexpert.com/discussion/comment/82186810#Comment_82186810

That will come down to the actual numbers in question…….if your total taxable income, including all the savings interest, would be covered by your PA, Marriage Allowance, PSA and Starter Rate for Savings, then it would probably make sense to move the savings into your name so your wife would benefit from the new PTA.

If not, then it's a numbers game to see which way would result in the lowest total joint tax bill (ie: who gets both savings and the transferable Marriage Allowance).

Another option might be to move the savings into Cash ISAs, thereby removing all or part of the savings interest from the calculation.

If you posted the actual numbers involved, then I'm sure you'd get a more complete/detailed answer to your query……..

Silvertabby

Note that HMRC can't take more than 50% of a private pension, so if your tax bill is more than half of your private pension they will take what they can from that, and send you a simple assessment tax bill for the remainder.

Just to stress that this 50% isn't a tax band - it's just the maximum amount HMRC are allowed to take as PAYE.

Veloflyer

https://forums.moneysavingexpert.com/discussion/comment/82186019#Comment_82186019

….but that direction of travel can easily be mis-interpreted and can create concern - as we see so often on this forum by folk asking what such and such actually means, and if they should take action. If the detail has not been worked through, then politicians should keep quiet until it has. There is no onus on them to say anything at all, but sadly many have an alarming tendency to spout vaguely at length on such issues. This can cause speculation and ultimately poor decision making by the individual, which in turn may well lead to financial loss.

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82187838#Comment_82187838

For the avoidance of doubt I was referring specifically to the budget statement, rather than more general discussions at other times - it's always been the case that policies are announced where the detailed design and implementation are dependent on consultation with stakeholders outside government, so it's impractical to have fully-formed 'oven-ready' solutions presented to parliament and the country!

Edit: hence the full quote from last year's budget document being:

The government will ease the administrative burden for pensioners whose sole income is the basic or new State Pension without any increments so that they do not have to pay small amounts of tax via Simple Assessment from 2027-28 if the new or basic State Pension exceeds the Personal Allowance from that point. The government is exploring the best way to achieve this and will set out more detail next year.