Marriage allowance vs savings starting rate

Hi, Does marriage allowance impact savings starting rate. ie; (My personal allowance is £12570) If I earn £13570 pa and I receive £5000 of savings interest pa, I only get tax relief on £4000 of my savings interest. If I use marriage allowance to gain tax relief on the £1000 of income I earn above my personal allowance, will I then get the full £5000 savings starting rate relief on the savings?

Hi AndyPG,
No the marriage allowance does not impact the savings starting rate.
The savings starting rate is £5000 above the personal allowance £12570.
Thank you.

Thanks but I'm still unclear on my exact question. To put things another way, If my personal allowance is £12570 and I also have £1000 of marriage allowance, will the first £18570 of savings interest be tax free if I have no other income?

Hi,

No, the amount for Marriage Allowance would not be added on. It entitles you to a fixed deduction off your overall tax liability.

You would be entitled for the starting rate for your income above the Personal Allowance of £12570, and the Personal Savings Allowance if required. You can see guidance here:

Tax on savings interest

Thank you.

Can somebody please clarify. I have given my marriage allowance to my husband, does that mean the starting rate for savings tax is calculated as £11310 + £5000 + £1000 = £17310 or does it remain at £12570 + £5000 + £1000 = £18750. Thanks.

Hi Whirlygig, I've asked the same question in several different ways on the forum and have never managed to get a straight answer. Always a vague answer then a referral to the written guidance which doesn't cover it. Frustrating! You definitely won't get the "+£1000" in addition to the £5000. The interesting bit is how the marriage allowance affects things. Good luck and well put. Andy.

Hi Whirlygig,
It would be the former, as you have transferred marriage allowance to your husband, so this allowance cannot be applied to untaxed interest or any other income you receive.
Thank you.
 

Hi Whirlygig I have raised this query too. The former is how it was calculated on my self assessment which means I transferred £1260 to my wife in allowance but also lost £1260 in starting allowance. My wife received the £1260 MA but not any additional starting allowance. This means that between us we are paying additional tax of £1260*20% =£252. I got nowhere with HMRC with this but have put in an appeal which of course takes for ever! I think there is a fundamental problem with the maths around this.

I am struggling to see the problem. The SRS sets a tax rate of 0% on up to £5,000 of savings income above your personal allowance, so if you have transferred £1,260 of you personal allowance then you have £11,310 left. If your non-savings income is less than, or equal to, £11,310, then you can receive £5,000 of savings income without paying any tax on it, plus, of course, your personal savings allowance of £1,000. The recipient of the transfer does not get an increased personal allowance but gets a tax reduction of £252 against their overall tax burden (£1,260 @ 20%). Their personal allowance remains at £12,570 and the SRS still provides 0% tax on up to £5,000 of savings income, plus of course their PSA of £1,000 too. If their total income exceeds these amounts, such that tax would be payable, then the £252 is deducted from that final tax liability. The maths works out just fine.

Well put Mark. I was the OP. Definitely an issue here. The system robs Peter to pay Paul. Andy.

Hi Gary Your maths is fine. However my earned income was unexpectedly in the end more than £12570 and not only have I transferred my allowance to my wife, I also lose £1260 of my starting rate. My wife gets the tax reduction of £252, but I pay tax of £252 on the MA I transferred but also pay tax on the starting rate allowance that I lost. Overall we are £252 worse off than if the election hadn't been made. To compound matters I haven't been able to withdraw the MA election for 2023/2024 or 2024/25. I tried to do it in April 24 but the system would only allow me to do it for 2025/26. The help desk stated that as the 2024/25 tax year had started they couldn't change the election for that year so it looks like there will be the same issue for this tax year. I have appealed against this election issue as well as the overall calculation.

Hi After an appeal MA was withdrawn by HMRC for 2023/24 and 2024/25. All now resolved. Calculations now work and our total self assessment tax payable reduced by £252.