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  • FIRST POST
    • vigman
    • By vigman 6th Feb 18, 11:21 AM
    • 1,218Posts
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    vigman
    Change married allowance?
    • #1
    • 6th Feb 18, 11:21 AM
    Change married allowance? 6th Feb 18 at 11:21 AM
    Until now, I have used the married tax allowance because I was earning £24500 from pensions and my wife only about £1000.

    For the tax year 2018/19 onward it looks like her income from an inherited rented property will be £12500.

    I immediately thought I ought to give her back my married allowance and that we should both be on the same basic allowance to sort out our tax affairs.

    However doing the calculations with income over and under the tax allowance and using basic and married allowances it seems to be better keeping the married allowance as if both are over the taxable limit the tax is the same but if my wife is under the taxable limit it is better me keeping the married allowance? Is this correct please?


    With MA Gross Income Taxable 20% Tax
    H £13,035.00 £24,500.00 £11,465.00 £2,293.00
    W £10,665.00 £13,000.00 £2,335.00 £ 467.00
    £2,760.00


    H £11,850.00 £24,500.00 £12,650.00 £2,530.00
    W £11,850.00 £13,000.00 £1,150.00 £ 230.00
    £2,760.00


    H £13,035.00 £24,500.00 £11,465.00 £2,293.00
    W £10,665.00 £ 9,000.00 £ 0.00 £ 0.00
    £2,293.00

    H £11,850.00 £24,500.00 £12,650.00 £2,530.00
    W £11,850.00 £ 9,000.00 £ 0.00 £ 0.00
    £2,530.00

    I also read somewhere that if you reverted back from the married allowance it seemed that the person on the married allowance had to pay back the tax rebate gained in the past (valid) years. Is this correct please?

    Finally, why does a self assessment tax form have to be completed if rental income is only £2500 - £11,849 per year and under the personal allowance?

    As always any confusion in my postings at the moment is down to large doses of morphine based painkillers...!!

    The figures and headers were in clear columns before submitting. Apologies for the odd formatting on posting

    TIA

    Vigman
    Last edited by vigman; 06-02-2018 at 11:23 AM. Reason: Last sentence
    Any information given in my posts or replies is intended to be of interest and/or help to members of the forum. I cannot guarantee that this is accurate or up to date.
Page 1
    • kidmugsy
    • By kidmugsy 6th Feb 18, 12:12 PM
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    kidmugsy
    • #2
    • 6th Feb 18, 12:12 PM
    • #2
    • 6th Feb 18, 12:12 PM
    I was under the impression that if her income is £13,500 you're not entitled to the marriage allowance. I suggest you google it.
    Free the dunston one next time too.
    • vigman
    • By vigman 6th Feb 18, 12:40 PM
    • 1,218 Posts
    • 289 Thanks
    vigman
    • #3
    • 6th Feb 18, 12:40 PM
    • #3
    • 6th Feb 18, 12:40 PM
    I was under the impression that if her income is £13,500 you're not entitled to the marriage allowance. I suggest you google it.
    Originally posted by kidmugsy
    Doh! Of course the marriage allowance can only be used if one earner has an income below the basic allowance.

    Hopefully her gross income of £12500 will be reduced to below the tax threshold after allowable expenses

    Thanks

    Vigman
    Any information given in my posts or replies is intended to be of interest and/or help to members of the forum. I cannot guarantee that this is accurate or up to date.
    • sheramber
    • By sheramber 6th Feb 18, 3:44 PM
    • 4,509 Posts
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    sheramber
    • #4
    • 6th Feb 18, 3:44 PM
    • #4
    • 6th Feb 18, 3:44 PM
    cancelling marriage allowance

    The date the allowance ends depends on who cancels it.

    If you stop transferring the allowance to your partner, it will run until the end of the tax year (5 April).

    If your partner asks to stop receiving your allowance, HMRC will backdate the change to the start of the tax year you first started transferring it.


    https://www.gov.uk/marriage-allowance/if-your-circumstances-change
    • vigman
    • By vigman 6th Feb 18, 4:30 PM
    • 1,218 Posts
    • 289 Thanks
    vigman
    • #5
    • 6th Feb 18, 4:30 PM
    • #5
    • 6th Feb 18, 4:30 PM
    I did read that thanks. It seems odd to me that in the second scenario you lose the genuine tax advantage that for example in my case was valid for the last two years? If it is backdated to the beginning of the requested change to Married Allowance rates I assume you repay the tax credit received (2 X £200 approx) for those two years?

    Why should it make a difference who requests the change anyway?

    On my other point why should someone complete a self assessment for £2,500 rental income when no tax is due on it if this is the sole income? Why not complete a self assessment when the rental amount is the same as the tax allowance rate?

    TIA

    Vigman
    Any information given in my posts or replies is intended to be of interest and/or help to members of the forum. I cannot guarantee that this is accurate or up to date.
    • Dazed and confused
    • By Dazed and confused 6th Feb 18, 10:42 PM
    • 2,475 Posts
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    Dazed and confused
    • #6
    • 6th Feb 18, 10:42 PM
    • #6
    • 6th Feb 18, 10:42 PM
    Providing neither of you are into the higher rate tax band there is nothing to stop you continuing with Marriage Allowance in place.

    There is no rule which means the person giving up 10% of their allowance has to have income of less than the personal allowance. In fact with the proliferation of 0% tax bands you could in theory have £20,000+ income (of the right sort) and still not have any tax to pay even if you had applied for Marriage Allowance and receive the reduced Personal Allowance.

    One thing to consider is that you aren't entitled to any extra allowance. Your wife applying entitles you to a reduction in your tax liability, not any extra allowances. It may not affect you but it can have devastating (financial) consequences if you get this wrong.

    Basically work out your tax due ignoring Marriage Allowance and then knock £238* off the bill.

    *According to gov.uk from April 2018 Marriage Allowance is no longer 10% of the personal allowance but will be £1190 next year.

    The example you give regarding your wife seems to be a perfect example of why a self assessment return is needed even when income is less than the personal allowance. If she had taxable income of £11849 and Marriage Allowance was still in place she should be paying £237.80 in tax.
    • kidmugsy
    • By kidmugsy 6th Feb 18, 11:38 PM
    • 10,369 Posts
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    kidmugsy
    • #7
    • 6th Feb 18, 11:38 PM
    • #7
    • 6th Feb 18, 11:38 PM
    gov.uk: "You can get Marriage Allowance if all the following apply:

    you're married or in a civil partnership
    you don't earn anything or your income is £11,500 or less
    your partner's income is between £11,501 and £45,000 (or £43,000 if you're in Scotland)"

    Whether that's an accurate summary of the law I don't know, but it is an official summary.
    Free the dunston one next time too.
    • vigman
    • By vigman 7th Feb 18, 11:06 AM
    • 1,218 Posts
    • 289 Thanks
    vigman
    • #8
    • 7th Feb 18, 11:06 AM
    • #8
    • 7th Feb 18, 11:06 AM
    Thanks 'Dazed and Confused'

    If my wife's income was £11,849 I see that the joint total tax would still be the same (pence rounded up) whether the marriage allowance is applied or not so in this instance would it be easier to revert to standard allowances and not have my wife fill in a self assessment?



    H £13,040.00 Income £24,500.00 Taxable Income £11,460.00 Tax £2,292.00
    W £10,660.00 Income £11,849.00 Taxable Income £1,189.00 Tax £237.80
    Total Tax £2,529.80

    H £11,850.00 £24,500.00 £12,650.00 £2,530.00
    W £11,850.00 £11,849.00 £0.00 £0.00
    Total Tax £2,530.00

    I was wondering why a self assessment form was necessary if the wife's income was only £2500 from rental as in the HMRC rules?

    Also please could you clarify: "One thing to consider is that you aren't entitled to any extra allowance. Your wife applying entitles you to a reduction in your tax liability, not any extra allowances. It may not affect you but it can have devastating (financial) consequences if you get this wrong.

    It is definitely me that should be called Dazed and Confused!

    TIA

    Vigman
    Last edited by vigman; 07-02-2018 at 11:10 AM.
    Any information given in my posts or replies is intended to be of interest and/or help to members of the forum. I cannot guarantee that this is accurate or up to date.
    • polymaff
    • By polymaff 7th Feb 18, 7:10 PM
    • 2,048 Posts
    • 885 Thanks
    polymaff
    • #9
    • 7th Feb 18, 7:10 PM
    • #9
    • 7th Feb 18, 7:10 PM
    gov.uk: "You can get Marriage Allowance if all the following apply:

    you're married or in a civil partnership
    you don't earn anything or your income is £11,500 or less
    your partner's income is between £11,501 and £45,000 (or £43,000 if you're in Scotland)"

    Whether that's an accurate summary of the law I don't know, but it is an official summary.
    Originally posted by kidmugsy
    Have you still not recognised that this nonsense on gov.uk is just that - nonsense?

    The point has been made again and again on MSE.
    • polymaff
    • By polymaff 7th Feb 18, 7:17 PM
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    polymaff
    Providing neither of you are into the higher rate tax band there is nothing to stop you continuing with Marriage Allowance in place.

    There is no rule which means the person giving up 10% of their allowance has to have income of less than the personal allowance.....
    Originally posted by Dazed and confused
    Yes there is. Don't make the same mistake - but in reverse - HMRC seems to have made.

    There are TWO sorts of acceptable applicant for MAT. Basically:

    1. Those who are UK resident for tax purposes can apply so long as they are not - or would not, after MAT, be - higher-rate tax payers.

    2. Those who are NOT UK-resident for tax purposes can only apply if their taxable income is no more than their personal allowance.

    HMRC seem to have ignored case 1 - don't you ignore case 2
    Last edited by polymaff; 07-02-2018 at 7:29 PM.
    • kidmugsy
    • By kidmugsy 7th Feb 18, 8:54 PM
    • 10,369 Posts
    • 7,060 Thanks
    kidmugsy
    Have you still not recognised that this nonsense on gov.uk is just that - nonsense?

    The point has been made again and again on MSE.
    Originally posted by polymaff
    Why not give us a link to your source?
    Free the dunston one next time too.
    • polymaff
    • By polymaff 8th Feb 18, 9:12 AM
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    polymaff
    Why not give us a link to your source?
    Originally posted by kidmugsy
    http://www.legislation.gov.uk/ukpga/2014/26/section/11
    • Dazed and confused
    • By Dazed and confused 9th Feb 18, 6:26 PM
    • 2,475 Posts
    • 1,180 Thanks
    Dazed and confused
    polymaff

    HMRC seem to have ignored case 1 - don't you ignore case 2

    Fair point! Will remember in the future.
    • Dazed and confused
    • By Dazed and confused 9th Feb 18, 6:41 PM
    • 2,475 Posts
    • 1,180 Thanks
    Dazed and confused
    vigman

    Also please could you clarify: "One thing to consider is that you aren't entitled to any extra allowance. Your wife applying entitles you to a reduction in your tax liability, not any extra allowances. It may not affect you but it can have devastating (financial) consequences if you get this wrong.


    One in particular which can be costly is if you have a deferred State Pension and opt for the lump sum. Using your logic (allowances of £13035) lets think about someone who had total income of £13,035 (having carefully avoided exceeding what they thought was their tax free allowance) and a State Pension lump sum of £25,000.

    As they aren't liable to any tax then no tax would be payable on the State Pension lump sum either.

    But in actual fact they are liable to tax on any normal income above their Personal Allowance of £11,850. So we have £13,035 less £11,850 = £1,185 taxable at 20% = £237. As the beneficiary of Marriage Allowance they can deduct £238 from their tax bill so no tax is payable.

    But they are a basic rate payer and therefore the State Pension lump sum is taxable at basic rate so £5,000 tax is payable on the £25,000 lump sum

    polymaff has provided a link to the legislation which states,

    55BTax reduction: entitlement
    (1)An individual is entitled to a tax reduction for a tax year of the appropriate percentage of the transferable amount if the conditions in subsection (2) are met.
    (2)The conditions are that—
    (a)the individual is married to, or in a civil partnership with, a person who makes an election under section 55C for the purposes of this section which is in force for the tax year (“the individual's spouse or civil partner”),
    (b)the individual is not, for the tax year, liable to tax at a rate other than the basic rate, the dividend ordinary rate or the starting rate for savings,
    (c)the individual meets the requirements of section 56 (residence) for the tax year, and
    (d)neither the individual nor the individual's spouse or civil partner makes a claim for the tax year under section 45 (married couple's allowance: marriages before 5 December 2005) or section 46 (married couple's allowance: marriages and civil partnerships on or after 5 December 2005).
    (3)“The appropriate percentage” is the basic rate at which the individual would be charged to income tax for the tax year to which the reduction relates.
    Last edited by Dazed and confused; 09-02-2018 at 6:45 PM.
    • polymaff
    • By polymaff 9th Feb 18, 7:07 PM
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    • 885 Thanks
    polymaff
    polymaff has provided a link to the legislation which states,
    Originally posted by Dazed and confused
    I can't take credit! The key point that your excellent example illustrates is that the party who elects for an MAT may find that their "Marginal Rate" of taxation for the year rises - with devastating results for some lump-sum recipients.

    There's many a slip to MAT - exacerbated by HMRC's lack of comprehension of the legislation, inevitably resulting in nonsensical advice - then made worse by the media employing "experts" who do nothing but unthinkingly parrot that nonsensical advice.
    • vigman
    • By vigman 11th Feb 18, 1:20 PM
    • 1,218 Posts
    • 289 Thanks
    vigman
    Thanks everyone for the detailed replies.

    I didn't even know about deferred state pensions and lump sums and it is only because of this excellent forum that I have managed to increase my weekly state pension which starts in August by paying an additional year of NI contributions

    In our case we won't actually know my wife's earnings of 18/19 until April 2019. I see that as she will most likely have some rental income over £2500 she will have to fill in a self assessment by 31st Jan 2020

    If I keep the marriage allowance then after she has filled in the SA I imagine HMRC will advise on which codes we should have used?

    Am I right in thinking it shouldn't make any difference to the total tax we pay if we have the MA applied or both have the standard allowance whether my wife's income is above or below her tax allowance and I am on £24k income?

    Out of interest when we were both self employed in the 1980s we used to submit audited accounts to the tax office and never filled in self assessment forms as wel. Has this changed ?

    TIA

    Vigman
    Last edited by vigman; 11-02-2018 at 1:22 PM. Reason: Added last question
    Any information given in my posts or replies is intended to be of interest and/or help to members of the forum. I cannot guarantee that this is accurate or up to date.
    • sheramber
    • By sheramber 11th Feb 18, 1:34 PM
    • 4,509 Posts
    • 3,405 Thanks
    sheramber
    First year for self ssessment was 1996/97
    • vigman
    • By vigman 15th Feb 18, 11:04 AM
    • 1,218 Posts
    • 289 Thanks
    vigman
    Okay.....OP here.

    I now know that from April 2018, I will have a gross income of £24,000 and my wife will have rental income of £1050 per month, £12,600 pa

    Should I leave the marriage allowance in place as our total tax bill will be the same or get my wife to ask for the allowance to be removed from me for the new tax year so that we are both on standard codes?

    (Am I right in understanding that if I request it removed the change will be backdated to when it first started and I will owe the tax refund gained back?)

    TIA

    Vigman
    Any information given in my posts or replies is intended to be of interest and/or help to members of the forum. I cannot guarantee that this is accurate or up to date.
    • polymaff
    • By polymaff 15th Feb 18, 5:47 PM
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    • 885 Thanks
    polymaff
    I now know that from April 2018, I will have a gross income of £24,000 and my wife will have rental income of £1050 per month, £12,600 pa

    Should I leave the marriage allowance in place as our total tax bill will be the same or get my wife to ask for the allowance to be removed from me for the new tax year so that we are both on standard codes?

    (Am I right in understanding that if I request it removed the change will be backdated to when it first started and I will owe the tax refund gained back?)
    Originally posted by vigman
    It's really up to you. There are some trip-ups - but for the majority MAT is a benign process.

    You're right in your understanding of HMRC's stance - although the legislation specifically forbids HMRC from accepting such a request.

    Classic HMRC.
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