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Marriage Allowance - charity donations

charlottestax
Posts: 18
Joined: Sat Dec 14, 2013 1:40 pm

Marriage Allowance - charity donations

Postby charlottestax » Wed May 16, 2018 4:21 am

Situation

HMRC self assessment calculator on the web gives a marriage allowance of 220

The hard copy calculation arrives with a comment and the marriage allowance deduction removed.

Telephone enquiry to HMRC points me at an HMRC web page quoting a figure for the maximum income permitted, being the sum of the basic rate band plus the personal allowance.

Charity donations have increased the band so no higher rate tax is payable but the HMRC person could not explain why marriage allowance was not permitted.

HMRC internal manual quotes the legislation correctly which refers to the criteria "liable to tax at a higher rate" or some such from memory.

It may be about the meaning of the word "liable."

No higher rate tax is shown as payable in the HMRC hard copy calculation.

Is there something special about charity donations?

Allowances as such seem to be ok as the personal allowance is permitted to increase the income allowed.

I note that the savings "allowance" 500/1000 in the legislation is specifically referred to as being treated as income for band calculation purposes and HMRC tax it at 0% rather than it being an allowance as such.
And by trial and error using the HMRC self assessment calculator, that is how it works.

How should charity donations work and is the marriage allowance due?

D&C
Posts: 15
Joined: Thu Dec 22, 2016 10:04 pm

Re: Marriage Allowance - charity donations

Postby D&C » Wed May 16, 2018 10:04 am

This may be the result of Dividend income.

Would some higher rate tax have been charged if it hadn't been for the Dividend nil rate band (otherwise known as the Dividend Allowance)?

robbob
Posts: 2545
Joined: Wed Aug 06, 2008 4:01 pm

Re: Marriage Allowance - charity donations

Postby robbob » Wed May 16, 2018 2:30 pm

Interesting

Unfortunately i have no answer here at present just questions and some observations
The hard copy calculation arrives with a comment and the marriage allowance deduction removed.
What did it say comments wise?

are you 100% certain the spouse has transferred the allowance and that this has been processed onto "your" account awaiting the calculation? - hmrc should be able to confirm
Without a processed transfer application from the spouse the claimed amount will always be removed

D&C is spot on with the dividend comment - i have run test calcs on my package and £1 of dividend income above h rate removed the marriage allowance even if that divi is within the Nil rate of tax (dividend allowance)
However strangely this does not happen if the interest received figure is less than £500 but pushes the income over the adjusted h rate level.
I am guessing my tax calc package is correct but anything is possible nowadays in this regard.
How should charity donations work and is the marriage allowance due?
Charity donations should work extending the basic rate band - if its a divi/interest received subtlety full details of all relevant income sources and gift aid relief may be needed to give the full answer - (once someone who knows the full chapter and verse is able to comment too :))

relevant note - its probably? too late here if the return has been submitted but the ability to carry back following years gift aid payments made before return is submitted may help if one has just exceeded the limit and those later gift aid payments carried back may have sorted the issue.

charlottestax
Posts: 18
Joined: Sat Dec 14, 2013 1:40 pm

Re: Marriage Allowance - charity donations

Postby charlottestax » Thu May 17, 2018 4:16 pm

Thank you everyone

The Comment is
"You are not entitled to the tax reduction because of marriage alowance because you or your spouse/civil partner do not meet the criteria"

Yes the Dividend treatment looks like a possible explanation.

Figures from HMRC hard copy Calculation

"Interest 843
Dividends 381
Income 49280
Less PA 11000
TI 39504

Higher Rate Band 39544 including Gift Aid

Basic Rate 38280*20%=7656
Interest Left Blank
Starting Rate 0 * 0%
Nil Rate 381 * 0%

Total Income on which tax has been charged 39504 "


NB 39504 is the sum of 38280 and 381 ..... plus 843 not mentioned!


Why does dividend do that.. it is described as NIL Rate.. Ah is it grossed up in some way? there is only 40 headroom
Whereas the interest is just not mentioned in the calculation
More Gift aid can be carried back from 2017/8 would that help?

robbob
Posts: 2545
Joined: Wed Aug 06, 2008 4:01 pm

Re: Marriage Allowance - charity donations

Postby robbob » Thu May 17, 2018 5:03 pm

Why does dividend do that.. it is described as NIL Rate
The problem with the dividend income is that hmrc advise as follows

The Dividend Allowance will not reduce your total income for tax purposes. However, it will mean that you don’t have any tax to pay on the first £5,000 of dividend income you receive.
Dividends within your allowance will still count towards your basic or higher rate bands, and may therefore affect the rate of tax that you pay on dividends you receive in excess of the £5,000 allowance.
https://www.gov.uk/government/publications/dividend-allowance-factsheet/dividend-allowance-factsheet

Taking this advise literally it does not then surprise me that you are officially a higher rate taxpayer despite paying no higher rate tax, what i am really surprised at is a situation where the hrmc internal calculations prior to submission don't come up with the correct answer, i thought all approved tax packages came up with the same figures - was this the actual hmrc pre submission calculation that you then used to submit? Its a bit off to provide calculations that show everything is ok then takes it back after submission - particularly if you could have held off submitting the return and carried back some more gift aid payments made after 6/4/2018.

D&C
Posts: 15
Joined: Thu Dec 22, 2016 10:04 pm

Re: Marriage Allowance - charity donations

Postby D&C » Thu May 17, 2018 6:14 pm

I think you have been caught out by a quirk of the Marriage Allowance legislation which specifies at section 55B 2 (ba)

If for the year the individual is liable to tax at the dividend nil rate, the individual would for that year neither be liable to tax at the dividend upper rate, not be liable to tax at the dividend additional rate, if section 13A (dividend nil rate) were omitted

Probably best read in conjunction with 55B 2 a & b but basically because you would have been higher rate then Marriage Allowance isn't due.

As the saying goes, tax doesn't have to taxing. But our legislators like to give it a try :o

charlottestax
Posts: 18
Joined: Sat Dec 14, 2013 1:40 pm

Re: Marriage Allowance - charity donations

Postby charlottestax » Thu May 17, 2018 7:41 pm

Thank you.
Yes the marriage allowance was allowed in the official HMRC self assessment online calculation as calculated just prior to online submission.

Can I now amend the online return for gift aid carried back from 2017/8 in order to qualify for Marriage Allowance? And by how much? It seems to me that 342 would just be enough. There is plenty of capacity to do that as gift aid payments happen to be high for good reason.

charlottestax
Posts: 18
Joined: Sat Dec 14, 2013 1:40 pm

Re: Marriage Allowance - charity donations

Postby charlottestax » Thu May 17, 2018 9:06 pm

On reflection this doesn't make sense to me.

Even if the dividend income nil rate is presumed to be taxable, the total taxable income is below the higher rate band. By £40.

If it is grossed up under the old rules the 381 becomes 423 which gives a total £2 over the band. Could that be the issue?

The detailed comment from D&C is "beyond my Ken"

Beacuse I dont see there would have been a liability to higher rate on these figures

Help please, what to do? Anyone?

D&C how much extra gift is needed to be carried back ?

charlottestax
Posts: 18
Joined: Sat Dec 14, 2013 1:40 pm

Re: Marriage Allowance - charity donations

Postby charlottestax » Thu May 17, 2018 9:39 pm

I have found this in the HMRC manual

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye100060#EligibilityCriteria

your spouse/civil partner 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

So it seems perhaps it has not been updated for the NIL rate band associated with dividend allowances?

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