Marriage Allowance

Is this right?

Didn't find your answer?

We have a H&W ltd co where they've claimed MA without me knowing.

I thought this would be a waste of time, but not so.

Both have PAYE income below £10k and then dividend income of at least £10k, so the only tax rate they're paying is 8.75%.

Wife transfers MA to husband.  Her tax liability goes up by £1,260 x 8.75% = £110.25

Husband gets a credit of £1,260 x 20% = £252.  So the family unit is £141.75 better off.

NB as I mentioned, client did this without my knowledge, so first I knew about it was the amended SA302 from HMRC for 2022-23.  Have just tried the calculation in my tax software and get the same answer.

Has this always been the case?  I have never come across this before.  It was always my understanding that it was only ever worth claiming if one spouse  was a standard rate taxpayer and the other was a non taxpayer.

 

 

Replies (16)

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DougScott
By Dougscott
18th Apr 2024 11:52

Interesting, I didn't realise that's how it worked either. I have no clients in that (unusual) position though!

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By Not Anonymous
18th Apr 2024 11:53

It looks correct to me.

Marriage Allowance is more nuanced than appears at first glance.

The difference here is a perfect example.

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By clark.hall
18th Apr 2024 12:31

With employment earnings < PA then it works as you've calculated to save the couple £141.75.

See this article: https://www.taxinsider.co.uk/the-new-marriage-allowance-good-news-for-fa...

But, I've never tried the closing suggestion of transferring the MA both ways and saving twice. Anyone out there tried that?

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By rmillaree
18th Apr 2024 12:39

its been no brainer like that since day 1 under certain specific circumstances like the one you have mentioned this is due to the credit being simply being 252.00 deduction from bill as long as you have paid 252.00 tax - rather than allocating hgher alowance as you might have expected and getting deductiuon at divi rate only.

note if both had salary at pa level there would be no saving

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By emanresu
18th Apr 2024 17:32

I commented on this when MA came out - pointing out the irony that those who could win were those HMRC consider to be Parasites.
Funny old world!

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Johny Fartpants Picture
By johnny fartpants
18th Apr 2024 18:21

Hi Richardrussell. Am I missing something here?

"Both have PAYE income below £10k and then dividend income of at least £10k, so the only tax rate they're paying is 8.75%."

If they're both paying 8.75% tax on their respective dividends then they don't qualify for Marriage Allowance

Who can apply
You can benefit from Marriage Allowance if all the following apply:

you’re married or in a civil partnership
you do not pay Income Tax or your income is below your Personal Allowance (usually £12,570)
your partner pays Income Tax at the basic rate, which usually means their income is between £12,571 and £50,270 before they receive Marriage Allowance

They don't meet the second criteria??

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Replying to johnny fartpants:
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By gillybean04
18th Apr 2024 21:01

The model of gov.uk since around 2016 is to dumb everything down. But when you do that with law you lose accuracy. (2)(b) gives the accurate version.

https://www.legislation.gov.uk/ukpga/2007/3/section/55B

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Replying to gillybean04:
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By FactChecker
18th Apr 2024 22:05

s55B is not the easiest of reads ... but, as you say, it gives the correct rules - unlike GOV.UK

Do you think HMRC understand or care that their adjuration (to stop phoning 'cos it's all on-line) will generate erroneous returns ... and thus more work for them?

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Replying to johnny fartpants:
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By rmillaree
19th Apr 2024 09:29

direct gov advise is hmrc taling out their ar ses - ie nonsense

presumably they feel that telling the truth might confuse morf people than it helps - in that regard they might be right but they should at leasy caveat their comments with link to the truth !! or re-word so as not to lie !!

as ever rossmartin is up to the job - this is how it should be doen if you want to be technically correct.

The Marriage Allowance may be claimed if all the following apply:

You are married or in a civil partnership.
You are 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. If you have income above the personal allowance a transfer may not benefit you and your spouse/civil partner as a couple.
Your spouse or civil partner has an annual income of between £12,570 and £50,270 (2022-23 - 2024-25 rates).
No claim has been made for a Married Couple's Allowance, which is available where one or both of the couple were born before 6 April 1935.

https://www.rossmartin.co.uk/income-claims-reliefs/1528-transferable-mar....

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Replying to rmillaree:
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By emanresu
19th Apr 2024 17:31

rmillaree wrote:

direct gov advise is hmrc taling out their ar ses - ie nonsense

presumably they feel that telling the truth might confuse morf people than it helps - in that regard they might be right but they should at leasy caveat their comments with link to the truth !! or re-word so as not to lie !!

as ever rossmartin is up to the job - this is how it should be doen if you want to be technically correct.

The Marriage Allowance may be claimed if all the following apply:

You are married or in a civil partnership.
You are 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. If you have income above the personal allowance a transfer may not benefit you and your spouse/civil partner as a couple.
Your spouse or civil partner has an annual income of between £12,570 and £50,270 (2022-23 - 2024-25 rates).


Also that the donor would not be pushed into higher-rate by the transfer.
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Replying to johnny fartpants:
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By emanresu
19th Apr 2024 09:40

"you do not pay Income Tax or your income is below your Personal Allowance (usually £12,570)".

Can you give a reference to this statement, FP?

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Replying to emanresu:
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By FactChecker
19th Apr 2024 13:23

https://www.gov.uk/marriage-allowance ... which as gillybean04 and others have pointed out is the usual simplified/inaccurate rubbish that frequently permeates the 'public guidance' to be found on GOV.UK

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Replying to FactChecker:
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By emanresu
19th Apr 2024 17:16

FactChecker wrote:

https://www.gov.uk/marriage-allowance ... which as gillybean04 and others have pointed out is the usual simplified/inaccurate rubbish that frequently permeates the 'public guidance' to be found on GOV.UK

Thanks. Yes, STILL utter carp, from start to finish.

I followed this up with HMRC software guys eight years ago. They said that they were not given any guidance from those who wrote the specification, so they propose a literal re-adjustment of the two party's coding - but this was rejected by who-knows-who as being likely to cause confusion. "Make it simpler" was a quote I was given.

So HMRC dropped the word "Transfer" off the way they referred to the process (MAT) - and decided that they'd just make it an "easy to understand cash bung" to the beneficiary.

Talk about the road to Hell!

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Replying to johnny fartpants:
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By Richardrussell
19th Apr 2024 16:14

johnny fartpants wrote:

Hi Richardrussell. Am I missing something here?

They don't meet the second criteria??

I know. If the client had asked me whether they should claim, I would have said not. But they did claim, and the first I knew about it was receiving the amended SA302's from HMRC.

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By Richardrussell
19th Apr 2024 16:17

Thank you all for your comments.

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By Michael Davies
22nd Apr 2024 10:52

Yep it always was very much a political tax relief,and is such a pfaff that HMRC have been scratching their heads ever since.The maximum tax advantage has always been smallish.Because of “fiscal drag”,we no longer qualified 2023/24.The allowance is not withdrawn during the tax year of non qualification,but is adjusted end of year.It’s one of those tax reliefs,that once introduced is unlikely to be ever withdrawn.

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