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Where Taxpayers and Advisers Meet

Creating a tax liability with the marriage allowance

Nonimous
Posts: 70
Joined: Thu Jul 16, 2009 12:39 pm

Creating a tax liability with the marriage allowance

Postby Nonimous » Fri May 17, 2019 4:42 pm

Just starting a 2018/19 return and have had a thought.

Mr M has a total income of £11760, which is below the personal allowance of £11,850.

If he surrenders 10% of his personal allowance he will have a personal allowance of £10,660. Of the £1100 which is now taxable, £300 is savings income so is taxable at 0% as below the £1000 allowance. He is therefore liable to tax at 20% on £800, making tax due of £160. If he had not surrendered his personal allowance he would have no tax liability at all.

Mrs M, meanwhile, has non-savings income of £21,000 and the transfer of part of her husband's personal allowance saves her £238 (being £1190 at 20%).

Net saving therefore £78

Is there any reason why one CANNOT do this? I understand that for various reasons a couple might not WANT to, but is there a reason why they CAN'T?

D&C
Posts: 61
Joined: Thu Dec 22, 2016 10:04 pm

Re: Creating a tax liability with the marriage allowance

Postby D&C » Fri May 17, 2019 10:39 pm

You are basically correct but do have one thing wrong, albeit it makes no material difference.

Mr M cannot make use of the savings nil rate band (PSA) as this is not available to such low income individuals.

M will pay 20% tax (or 19% if Scottish resident in 2018:19) on the non-savings income above £10,660 but the £300 savings interest will then be taxed at the savings starter rate. Which is 0%.

Providing Mr M isn't considered a higher rate payer then he is eligible to apply. He could have taxable income of £40k and be eligible for Marriage Allowance. There would usually be no benefit in doing so as he would end up with a bill equivalent to the tax credit Mrs M would end up with but eligibility and being able to benefit are two distinct things when it comes to Marriage Allowance :)


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