As my wife's income is below the tax threshold, and I have to pay tax,
it appears that we qualify for the new Marriage Allowance (introduced
However, despite looking at countless websites, I am still uncertain
about what 'income' is. Some websites imply that it is total income -
"Anyone who earns less than that amount â once earnings from work,
savings and pensions are taken into account â does not pay any income
However, the gov.uk calculator asks the non-taxpaying applicant to enter
"Your annual income. Don't include any savings interest under Â£5,000)
and the for the spouse
"Your spouse or civil partner's annual income Don't include any savings
interest under Â£5,000."
So one is left to assume that "income" is anything (gross) - expect
savings interest under Â£5000. Is this correct (and, if so, why)?
Also, as we are not yet at the end of the current financial year (the
first in which the Marriage Allowance can be claimed), the gov.uk
calculator (in which you can really only enter your income for the
previous financial year, before the allowance came in), is only intended
to provide you with an indication of what your allowance will be 'for
real', when the present financial year ends?
Welcome to the wonderful world of Geroge Osborne: "under Gordon Brown
the UK led the world when it came to complification of the tax system
but we have found many more ways to take taxpayers into whole new areas
of complexity". (Transferable allowances are available in many fiscs
but not with the complexities introduced by the politicial need to deny
benefit to higher rate taxpayers (those filthy stinking rich people
like, eg, nurses and teachers).
Yes(ish). The condition in the legislation is actually is not "liable
to tax at a rate other than the basic rate, the dividend ordinary rate
or the starting rate for savings". That's a wee bit complicated so what
the website asks looks to be a fair approximation. (I'd need more than
a quick referesher to work out just what if any effect might come from
things like gift aid.) The "why" is so as to limit the benefit to - very
broadly - plain vanilla basic rate taxpayers.
Goodness only knows. Once upon a time there would have been statutory
cover for accepting claims in advance, based either on previous year's
figures or estimated figures. It'd be very sensible for them to do some
such so in order to reflect the allowance for 2015-16 in PAYE codes for
2015-16. (Many if not most claimants won't be making self assessments.)
But whether HMRC are doing and on what basis is not clear to me - albeit
I have no personal interest so haven't gone looking. I have eg read
that at opne time HMRC were stating that you needed income less than
?10,600 to claim.
The transferable allowance is a fixed amount - I think it's 1,060 - so,
if you're a standard rate taxpayer and this is transferred to you, you
will pay £212 less tax. *But* the recipient has to be a standard rate
taxpayer. If you pay tax at 40% or above, the allowance cannot be
transferred to you.
Also, if your wife has less than £1,060 worth of unused allowance, she
could end up paying some tax - and the net gain would be less. In the
current Tax Year, the standard allowance is £10,600. If your wife earns
(say) £10,000 from work or pensions (but not savings unless she gets
more than £5,000 in interest) she will pay no tax. But if she transfers
£1,060 to you, her allowance will go down to £9,540 - so she'll have to
pay tax of £92 on the extra £460 - so your net saving will only £120.
Tax on savings interest is a bit complicated! The £5,000 allowance is on
top of the standard £10,600 - but *only* if you don't have any ordinary
income in that range. So if, for example, you have a salary of £16,000 -
that takes you above the £15,600 total, so you lose your savings
allowance and would have to pay tax on any interest received. That's for
THIS Tax Year. As from next Tax Year, you'll be able to receive up to
£1,000 in interest tax free even if your income is higher - but only
£500 if you're a 40% tax payer and (I think) nothing at all if you're a
45% tax payer.
For further information, have a look at:
Not so much 'complicated' as 'plain daft' - brought in, IIRC. by George
Brown to stop the better-paid (>Â£24k or so) from benefiting from all of
the savings interest tax-free band. It's probably more trouble than it's
Yes, I know (I've filled in enough tax returns!!!). Actually, most of
the information on tax (from all sources) is fairly clear - apart from
the two things that constantly annoy me, which are that it's rarely made
clear whether they are referring to taxed income and untaxed income, and
what actually IS 'income'.
Anyway, it appears that the calculator is essentially only a rough guide
for your own amusement. If you and your spouse appear to qualify for the
Marriage Allowance, if you submit the online application, HMRC will make
the appropriate adjustments to your tax (presumably after they have
received you annual tax return).
I think it gets even worse next year. Someone earning 149999 will get
500 of interest tax free (saving 200 of tax). Someone earning 150000
will get no interest tax free - so will be 199 pounds worse off. That's
a 20000% tax rate. Not sure if pension contributions or gift aid can be
used to avoid this for anyone right on the cusp.
The pension annual allowance withdrawal will mean that the next pound is
effectively taxed at 90% assuming maximum pension contributions. And
AIUI, giftaid won't get your pension annual allowance back unlike the
reduction of the nil rate band for people earning just over 100000.
Of course, once you're earning over 210000 then you're back in the 45%
tax bracket for each extra pound.
This all presupposes that the pension system doesn't get completely
rewritten again this year (and next year, and the year after...)
A progressive tax regime appears to be outside of the comprehension of
politicians, whether that be the rather well off or people on benefits.
Just a late followup....
I did the online application for the marriage allowance a couple of
weeks ago (will apply to tax year 2016-17), and almost immediately my
wife and I got our tax codes updated accordingly. It looks like I will
be paying less tax 'as I go' throughout the year (rather than having to
wait until the end of the new tax year, and get a refund after I've
submitted our tax returns).
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