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Marriage allowance transfer and higher earner
jt64
Posts: 12 Forumite
in Cutting tax
Hi,
So for 17/18 my wife didn't earn more than the personal allowance whilst I was slightly over the higher rate threshold BUT - after deducting the relevant (pension contribs, gift aid etc.) my headline income on which I actually pay tax is under the HRT.
Does this mean we can transfer 10% of her unused personal allowance or that we can't? In other words is the limit for the higher earner based on the headline figure the higher earner actually earned or based on the net earnings they are actually taxed as having earned?
I can't find an answer to this anywhere.
TIA,
Jon.
So for 17/18 my wife didn't earn more than the personal allowance whilst I was slightly over the higher rate threshold BUT - after deducting the relevant (pension contribs, gift aid etc.) my headline income on which I actually pay tax is under the HRT.
Does this mean we can transfer 10% of her unused personal allowance or that we can't? In other words is the limit for the higher earner based on the headline figure the higher earner actually earned or based on the net earnings they are actually taxed as having earned?
I can't find an answer to this anywhere.
TIA,
Jon.
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Comments
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"We" cannot "transfer 10% of her unused personal allowance".
Your wife could apply for Marriage Allowance but that means she is giving up 10% of her Personal Allowance (10% of the total allowance not of any surplus). Doing this may make her liable to pay some tax. She doesn't have to have income under the Personal Allowance to be eligible. She might have income which would fall to be taxed at 0% and it could still be worth applying (for you as a couple to benefit overall).
You will be able to benefit (you don't get any extra allowances, you get a fixed deduction of your tax bill) providing you are not liable to higher rate tax.
The one exception is where you have dividend income which would be taxed at higher rates if it weren't for the dividend nil rate band (commonly, and confusingly, known as the Dividend Allowance).
So subject to your wife being happy with the possibility of getting a tax bill* (you obviously could pay that from any refund you get) and you having already told HMRC about your pension contributions** and gift aid then you (your wife really) should be fine.
*obviously she may be well under the reduced Personal Allowance level but without knowing her total taxable income, and what type of income she has received its impossible to say
**I presume you are referring to a personal pension or SIPP, if not it may be different0 -
See hmrc guidance at https://www.gov.uk/marriage-allowance
Clearly says one condition is that you pay tax at the basic rate so if you do by having circumstances that put you in that tax bracket......note slightly different rate definitions for Scottish residents. You can back date applications for allowance transfers.
Edit [ and another great post by D&C explaining the benefits and risks!]0 -
Thanks Both. That looks like good news. Yes the HMRC page says "your partner pays income tax at the basic rate" so hopefully...
I'm about to submit both our SA so I'll update as to whether HMRC allow the transfer or not. They did the previous tax year but my headline income was anyway below the limit so the Q didn't arise.0 -
All you need to do is look at both SA calculations.
If neither of you are liable to higher rate tax and neither have dividend income then you are both definitely eligible to either apply for or receive Marriage Allowance.
Obviously there is no point, financially, in you applying but your wife could do so and the calculation should at least show the consequences for her as it will include her reduced Personal Allowance.
HMRC will allow the application if you are both eligible. They do not consider whether you can benefit from doing so i.e. you could apply to transfer Marriage Allowance to your wife and they would accept that even though it wouldn't be financially sensible for you do it (based on what you've posted on this thread).0 -
The SA calcs don't show it yet. My experience from last year was that I submitted both on the same day and then about a week later got an updated statement from HMRC showing the additional benefit of the transfer.
Wife still won't hit the 20% band even after transferring the 10% of her allowance to me so we're OK there.0 -
Forget HMRC's - and other's - "advice". The only thing that prevents UK-based taxpayers from electing for the Marriage Allowance Transfer is if either of the two parties concerned are - or would be as a result of MAT - classified as higher rate taxpayers.
Specifically, the Personal Allowance has NOTHING to do with eligibilty - it just affects how beneficial MAT will be to the two parties.
Once you understand what is meant by "higher rate taxpayer", then THAT'S IT.
Just amazing how misunderstood MAT still is - not the least by HMRC.0 -
Marriage Allowance seems like a candidate for a sticky thread, as a variation on this question is asked fairly regularly?0
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I can confirm that the rules would appear to be based only on the higher earners net income after allowable deductions (private pension contribs & gift-aid) being less than the Higher Rate Threshold and not on the headline earnings figure. I've just logged in and my SA return has been adjusted after submission to show an extra £230 owing to me
0 -
Forget HMRC's - and other's - "advice". The only thing that prevents UK-based taxpayers from electing for the Marriage Allowance Transfer is if either of the two parties concerned are - or would be as a result of MAT - classified as higher rate taxpayers.
Specifically, the Personal Allowance has NOTHING to do with eligibilty - it just affects how beneficial MAT will be to the two parties.
Once you understand what is meant by "higher rate taxpayer", then THAT'S IT.
Just amazing how misunderstood MAT still is - not the least by HMRC.I can confirm that the rules would appear to be based only on the higher earners net income after allowable deductions (private pension contribs & gift-aid) being less than the Higher Rate Threshold and not on the headline earnings figure. I've just logged in and my SA return has been adjusted after submission to show an extra £230 owing to me
Right. I'll tick you off the list.
Only about 64 million to go.
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