“I have recently landed quite a good job which has allowed me to breach the upper tax bracket in Scotland of £43,000. I recently got married and my wife earns below this tax bracket, so only pays basic-rate income tax.We pool our earnings to pay household bills, Is there any way I can transfer some of my earnings to her to bring me back to basic rate, while keeping her in this tax bracket also?”
Following decisions made by the Scottish government, the income tax bands for those who live in Scotland are different from those who live in the rest of the UK.
In the current 2018/19 tax year, Scottish residents benefit from a personal tax-free allowance of £11,850, they pay 19% for income between £11,850 and £13,850, 20% between £13,851 and £24,000, 21% between £24,001 and £43,430, 41% between £43,431 and £150,000 and 46% for income in excess of this.
This compares with main UK rates where there is still a personal allowance of £11,850, but then income is taxed at 20% between £11,851 and £46,350, 40% between £46,351 and £150,000 and 45% beyond this.
People are taxed individually for income tax and it isn’t possible to transfer your earnings to somebody else.
It is possible for some people to transfer part of their personal income tax allowance through the marriage allowance. This allows somebody to transfer 10% of their personal allowance to a spouse or civil partner. However, this is only permitted when the person transferring the allowance is a basic-rate taxpayer and the person receiving it is a non-taxpayer so this won’t apply to you.
While you cannot transfer your earnings to your wife, there may be financial plans you can make to reduce your income tax bill. This includes holding taxable investments or savings in your wife’s name rather than your own and also making pension contributions from which, if you’re a higher-rate taxpayer, you can benefit from a higher rate of tax relief.
If you are married, or in a civil partnership, you maybe able to save up to £238 every tax year by moving part of your personal allowance – the amount you can earn before tax – to your partner.
To be eligible, one of you must be a basic-rate taxpayer (earning less than £46,350 a year in England and Wales or £43,430 in Scotland), and the other must earn less than the personal allowance (£11,850 a year in the 2018/19 tax year).
If you fall into these categories, then the lower earner should contact HMRC (Gov.uk/apply-marriage-allowance) and request that their unused personal allowance (up to a maximum of £1,190) is transferred to their partner.
Once it’s done, your partner will be able to earn more before paying income tax.
This article was originally published in our sister magazine Moneywise, which ceased publication in August 2020.
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