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Where Taxpayers and Advisers Meet

Marriage Allowance

emmabrannigan
Posts:5
Joined:Thu Feb 11, 2021 11:57 am
Marriage Allowance

Postby emmabrannigan » Thu Feb 11, 2021 12:24 pm

Hi there, looking for a bit of guidance on how Marriage Allowance works with the Scottish tax system?

From what I can read about it and my own knowledge, it should be a straight forward 10% allowance transfer however with the Scottish system and it being different tax rates applicable (starter rate, basic rate and intermediate) I'm unsure about how the allowance transfer works and how the tax code is then affected?

robbob
Posts:3150
Joined:Wed Aug 06, 2008 4:01 pm

Re: Marriage Allowance

Postby robbob » Fri Feb 12, 2021 10:08 am

I think you have hit a blank here with regard to anyone having much useful to say - i will chip in with my possibly?? uniformned comments.

You should be eligible if you are not higher rate taxpayer before transfer is granted (possibly subject to certain caveats if you are very close to higher rate !!) - the intermediate rate tax isnt an issue ref eligibility generally speaking .

I would expect your pa via code to be increased by 1250 approx - probably exactly 1250 (not 100.00% sure for certain if i am being honest) - so 125 extra added to your actual code.

There is always the potential for the tax collceted at source to not end up being correct - i suspect this may be the case on hmrc tax calcs if done at year end always issued £250 credit (presuming £250 tax has been paid) - so i suspect if you are intermediate rate taxpayer you might actually get £262 of relief at source if you avoid paying tax at 21% on 1250 - you are then at the mercy of whether hmrc will claw this amount back (eg if you are within sa are issued a p800 or simple assessment) - i would presume the hmrc will not issue p800's solely for £12 or £13 only but thats just guesswork.

Frankly the tweeks to the scottish tax rates for the 1% band changes are the most ridiculous bit of political manouvering i have ever seen with regard to the tax system in my life - to tweek tax bands for the sake of at most £20 tax difference come year end is outrageous - the only reason they have done this is so that they the politicians can say that "more people pay less tax under this system than the old system" they would have fixed the numbers to excatly fit that criteria (probably close to 51% better of by no more than £20) - as that £20 is not clawed back till earnings exceed £25k+ - i am not knocking £20 in anyones pockets but creating stupid tax bands for the sake of political spin is outrageous - all IMHO other may disagree and say its a worthy nod to the needy :).

D&C
Posts:50
Joined:Mon Nov 25, 2019 11:35 pm

Re: Marriage Allowance

Postby D&C » Fri Feb 12, 2021 9:05 pm

The recipient of Marriage Allowance is entitled to a tax reduction of £250 (current tax year).

To try and ensure Scottish taxpayers receive the correct amount of tax relief during the year HMRC will include additional tax code allowances (not Personal Allowance) based on the expected tax band applicable to the PAYE income.

A 19% payer would get an extra £1,316 allowances
A 20% payer would get £1,250
A 21% payer would get £1,191

If a calculation is needed after the end of the tax year these allowances are ignored and a tax deduction of £250 allowed (asp we the legislation).

robbob
Posts:3150
Joined:Wed Aug 06, 2008 4:01 pm

Re: Marriage Allowance

Postby robbob » Sat Feb 13, 2021 9:38 am

To try and ensure Scottish taxpayers receive the correct amount of tax relief during the year HMRC will include additional tax code allowances (not Personal Allowance) based on the expected tax band applicable to the PAYE income.

A 19% payer would get an extra £1,316 allowances
A 20% payer would get £1,250
A 21% payer would get £1,191
Thanks for that D&C -my basic google search failed miserably to flag anything up - very intersting if somewhat ludicrously stupid/complicated set of codes - i'm not surprised emmabrannigan is somewaht confused. Would be interesting to see what % of peeps in soctland actually have the correct tax deducted in year where they have one of these codes.

D&C
Posts:50
Joined:Mon Nov 25, 2019 11:35 pm

Re: Marriage Allowance

Postby D&C » Sat Feb 13, 2021 11:41 am

It is mentioned near the bottom of this page of a HMRC manual.

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye100035

emmabrannigan
Posts:5
Joined:Thu Feb 11, 2021 11:57 am

Re: Marriage Allowance

Postby emmabrannigan » Tue Feb 16, 2021 8:08 am

Hello,

Thank you for your response - it is most helpful!

My partner is an intermediate tax payer but he got a rebate back in 2018 - will this affect how much we would get back if I was to speak to HMRC? I've heard that for some people it means they actually end up owing HMRC money and I don't want to end up with an unexpected bill!

robbob
Posts:3150
Joined:Wed Aug 06, 2008 4:01 pm

Re: Marriage Allowance

Postby robbob » Tue Feb 16, 2021 9:45 am

My partner is an intermediate tax payer but he got a rebate back in 2018 - will this affect how much we would get back if I was to speak to HMRC? I've heard that for some people it means they actually end up owing HMRC money and I don't want to end up with an unexpected bill!
Generally the marriage transfer was only really thought up for a situation where one of the two people involved has income below the personal allowance - so if the person making the transfer has income within 1250 of the personal allowance then unfortunately they will have extra tax to pay. The closer their income to the personal allowance level the less the overall saving as the more their income will be taken about the pa level and taxed.


With the scottish rates varying by 1% there could be saving pimping out the 1% different bands if both are taxpayers and the rules allow a transfer (i am not aware that there are any restrictions here for non higher rtae taxpayers) - i am struggling to think how this plan could save more than £13 or so generlaly speaking - £13 is 6 cheap pints though pre covid prices. That would be 19% taxpayer swapping their allowance to spouse who pays at least £250 tax.


- there are also other potentially quirky situations where transfer may be worthwhile - eg if one taxpayer pays dividend tax rate of 7.5% there could be a decent saving

emmabrannigan
Posts:5
Joined:Thu Feb 11, 2021 11:57 am

Re: Marriage Allowance

Postby emmabrannigan » Tue Feb 16, 2021 11:20 am

Thank you for all of your help, very much appreciated.


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