Marriage allowance - details with dividends

[booms]

Just checking this out.

My spouse didn't work this year and is able to transfer 10% of their PA to me under the Marriage Allowance.

I intended to take out £702*12=£8424 as payroll, and then the rest of my PA + £2,000 div allowance this year. This brings me in just below being a basic rate tax payer (a requirement for Marriage Allowance)

If I'm able to transfer over £1,190 then that reduces basic rate tax at £238 of tax liability.

Therefore if I pay myself an additional £3,173 of dividends - that theoretically makes me a basic rate tax payer, I'd theoretically pay (£3,173x 7.5%)=£238 of tax and the Marriage Allowance would cover that.

Have I got that right?

[northernladuk]

Dunno. Let me ask your accountant.

[Dom at Fox Bartfield]

MCA

Have I got that right?

Yep, just make sure you make the application for the transfer which can be done online here

[booms]

Yep, just make sure you make the application for the transfer which can be done online here

Thanks Dom - we've already done the application and received updated tax codes.

Just wanted to confirm that in this case I could pay myself the additional £3,173 in dividends rather than £1,190 as I'd assumed.

I can't find this particular case being discussed in this detail anywhere so it seems pretty obscure?

[craigy1874]

Thanks Dom - we've already done the application and received updated tax codes.

Just wanted to confirm that in this case I could pay myself the additional £3,173 in dividends rather than £1,190 as I'd assumed.

I can't find this particular case being discussed in this detail anywhere so it seems pretty obscure?

It is an obscure situation as no one really restricts dividends to tax free levels, when they can take up to £35/£40k and only pay 7.5% tax on it. Assuming you have reserves, why would you restrict so much? 7.5% is better than best case 10% if you are using MVL.

[WordIsBond]

Have you considered giving your spouse shares instead? That would be much more tax efficient.