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Where Taxpayers and Advisers Meet

Marriage allowance exempt?

ianlew2303
Posts: 3
Joined: Mon Dec 23, 2019 3:12 pm

Marriage allowance exempt?

Postby ianlew2303 » Mon Dec 23, 2019 3:19 pm

Good afternoon, my mother in law mentioned that she just applied for marriage allowance (she doesn't earn enough to pay income tax), and the 2 of them received £1000 for the last few years.
I am a higher rate tax payer, but the amount I give to charity nullifies any higher rate tax. In effect it takes my income to below £50000, so I don't pay 40% on any income.

I asked HMRC if I would be eligible for marriage allowance (my wife earns less than £10k) but the guy said no, marriage allowance is based on income without any deductions.

Is that right? I thought my income that is considered for purposes like this would be 'post- giving', and other websites seem to suggest similar.

Thanks in advance for advice!

darthblingbling
Posts: 338
Joined: Wed Aug 02, 2017 9:09 pm

Re: Marriage allowance exempt?

Postby darthblingbling » Tue Dec 24, 2019 1:03 pm

Legislation simply says not subject to tax at a rate other than the basic rate (and some other bands relating to Scotland, savings and dividends). If your Gift Aid takes you out of higher rate tax then I would suggest you're eligible.

ITA 2007 s55B

Lambs
Posts: 1462
Joined: Wed Aug 06, 2008 3:15 pm

Re: Marriage allowance exempt?

Postby Lambs » Tue Dec 24, 2019 1:57 pm

I,

Basically to echo D,

ITA 2007 s 55C (1)(c) requires only that the 'donor' not be taxable at anything beyond the basic rate, if he or she were to give up 1/10th of his or her Personal Allowance.

There is another condition which requires the donor's income to be below the tax-free Personal Allowance but that applies ONLY for non-UK residents claiming a Personal Allowance for (e.g.) Forces deployment, or similar.

Likewise s 55B (2)(b) which imposes similar conditions on the recipient.

HOWEVER, if either party's income is skirting close to the HR threshold, note that while the Savings Nil Rate - the "Savings Allowance" - CAN shield you from 'tripping' the threshold for the purposes of the TTA, the Dividend Nil Rate - the "Dividend Allowance" - CANNOT.

So, if either of you is protected from being a higher rate taxpayer wholly or partly by virtue of the "Dividend Allowance", then an election to transfer will fail.

Trust this makes sense but get back to us if not.

Regards All,

Lambs

D&C
Posts: 37
Joined: Mon Nov 25, 2019 11:35 pm

Re: Marriage allowance exempt?

Postby D&C » Wed Dec 25, 2019 10:21 am

I suspect the op has thoroughly confused HMRC by this type of comment.
I am a higher rate tax payer
A higher rate taxpayer is not eligible for Marriage Allowance. But it appears that the op isn't a higher rate taxpayer. So unless they would be higher rate if it weren't for the Dividend nil rate they should be ok.

The simplest thing would be for the op's wife to just apply and then HMRC will check eligibility and make any refund due to the op and, if necessary, send the op's spouse a bill for any tax she now owed.

Op. It is important your wife checks her income for each year she intends to apply for. HMRC only check eligibility for Marriage Allowance, not whether you, as a couple can benefit. For example if for one year she earned (from a job/pension/self employment etc) say £25k she is eligible. So an application would be accepted (assuming you were also eligible.

The net affect of that might be, taking 205:16 as an example, that she owes £214 and you get a tax refund of £210.

Moral is take care before applying.

D&C
Posts: 37
Joined: Mon Nov 25, 2019 11:35 pm

Re: Marriage allowance exempt?

Postby D&C » Wed Dec 25, 2019 10:23 am

Sloppy,
The net affect of that might be, taking 205:16 as an example, that she owes £214 and you get a tax refund of £210.
Should have said

The net affect of that might be, taking 2015:16 as an example, that she owes £214 and you get a tax refund of £210.

Lambs
Posts: 1462
Joined: Wed Aug 06, 2008 3:15 pm

Re: Marriage allowance exempt?

Postby Lambs » Thu Dec 26, 2019 6:06 pm

All

The querist said

"I am a higher rate tax payer, but the amount I give to charity nullifies any higher rate tax."

If that confuses HMRC's Helpdesk then we need a new Helpdesk.

Taxpayers, who are not supposed to be expert in tax matters, are allowed to be imprecise.

Having said that, I spend half of my professional career in despair at the ineluctable ineptitude of said Helpdesk.

To expand on the points last raised, since the donor / electing spouse's income is less than £10k we can be reasonably sure that it is unlikely that there will be any tax cost to her electing to transfer 10% of her Personal Allowance.

Merry Christmas!

Regards all,

Lambs

ianlew2303
Posts: 3
Joined: Mon Dec 23, 2019 3:12 pm

Re: Marriage allowance exempt?

Postby ianlew2303 » Tue Dec 31, 2019 9:38 am

Thank you all for your assistance. This probably sounds like a stupid question, but how would I know if I am a higher rate tax payer or not? My gross income from my employer would suggest I am, and I also receive some income from a rented property which muddies the water a little. But then I think I give enough to charity to effectively reduce my income below £50k. I don't recall seeing anything on my tax return which laid out how much of my income was taxed at 20% and how much at 40%.

Thanks!

D&C
Posts: 37
Joined: Mon Nov 25, 2019 11:35 pm

Re: Marriage allowance exempt?

Postby D&C » Tue Dec 31, 2019 6:26 pm

I don't recall seeing anything on my tax return which laid out how much of my income was taxed at 20% and how much at 40%.
It won't be shown on your tax return.

But it is detailed in your Self Assessment calculation.

This shows how the income left after deduction of Personal Allowance had been taxed.
But then I think I give enough to charity to effectively reduce my income below £50k.
I suspect you are getting further confused. Most charitable (Gift Aid) payments do not reduce your taxable income. They do however increase the amount of your basic rate tax band, which in turn can reduce the amount of higher rate tax payable.

For example if your taxable income is £54,000 and you make Gift Aid payments of £5,000 (gross amount including basic rate tax relief) then your taxable income is still £54,000. But your basic rate band will be increased from £37,500 to £42,500.
NB. UK figures for current tax year, different if you are Scottish resident for tax purposes.

Lambs
Posts: 1462
Joined: Wed Aug 06, 2008 3:15 pm

Re: Marriage allowance exempt?

Postby Lambs » Tue Dec 31, 2019 7:00 pm

I,

As per D's last, Gift Aid donations and pension contributions are not subtracted from your taxable income (that would be too straight forward) but instead they push up the Higher Rate threshold, the Personal Allowance restriction threshold (usually at £100,000) and the Additional Rate Threshold (£150,000).

Which is why you can earn say £54,000 but still not be a Higher-Rate taxpayer if your Gift Aid / pension contributions are high enough: the 'trigger points' have been nudged higher up the chart.

Your contribution suggests that you are already at the (usual) £50k mark based merely on PAYE earnings; you have rental income on top of that.

Those Gift Aid contributions are going to have to be pretty substantial in order to move the Higher Rate threshold from the standard £50k mark to above your PAYE AND your rental income combined.

But if they are, then you are entitled to the so-called "Marriage Allowance"

Regards all,

Lambs

ianlew2303
Posts: 3
Joined: Mon Dec 23, 2019 3:12 pm

Re: Marriage allowance exempt?

Postby ianlew2303 » Tue Dec 31, 2019 10:14 pm

Thank you all, yes the Gift Aid contributions cover both the PAYE and rental income. As a result of your helpful advice I called HMRC today and spoke to someone who knew what she was doing. She checked my self assessment totals and found that I was eligible for Marriage Allowance in 3 of the last 4 years. A good result all round!

Many thanks all!


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