The marriage allowance The marriage allowance permits certain couples to transfer £1,260 of their personal allowance to their spouse or civil partner.
so may affect the rate of tax paid on savings above the Savings Allowance. Some individuals qualify for a 0% starting rate of tax on savings income up to £5,000. However, the rate is not available if taxable non-savings income (broadly earnings, pensions, trading profits and property income, less allocated allowances and reliefs) exceeds £5,000. Tax on dividends Currently, the first £1,000 of dividends is chargeable to tax at 0% (the Dividend Allowance). This will be reduced to £500 for 2024/25.
These changes will apply to the whole of the UK.
Dividends received above the allowance are taxed at the following rates for 2024/25:
Comment The marriage allowance reduces the recipient’s tax bill by up to approximately £250 a year. To benefit from the marriage allowance one spouse or civil partner must normally have no income or income below the personal allowance for the year. Since the marriage allowance was first introduced there are couples who are entitled to claim but have not yet done so. It is possible to claim for all years back to 2019/20 where the entitlement conditions are met. The total tax saving for all years up until 2022/23 could be over £1,000. A claim for 2019/20 will need to be made by 5 April 2024. Tax on savings income Savings income is income such as bank and building society interest. The Savings Allowance applies to savings income and the available allowance in a tax year depends on the individual’s marginal rate of income tax. Broadly, individuals taxed at up to the basic rate of tax have an allowance of £1,000. For higher rate taxpayers the allowance is £500. No allowance is due to additional rate taxpayers. Savings income within the allowance still counts towards an individual’s basic or higher rate band and
• 8.75% for basic rate taxpayers • 33.75% for higher rate taxpayers • 39.35% for additional rate taxpayers.
The Corporation Tax due on directors’ overdrawn loan accounts is paid at 33.75% and remains unchanged. Dividends within the allowance still count towards an individual’s basic or higher rate band and so may affect the rate of tax paid on dividends above the Dividend Allowance. To determine which tax band dividends fall into, dividends are treated as the last type of income to be taxed. Pension tax limits A number of changes were made to the tax regime for pensions for 2023/24: • The Annual Allowance (AA) is £60,000. • Individuals who have ‘threshold income’ for a tax year of greater than £200,000 have their AA for that tax year restricted. It is reduced by £1 for every £2 of ‘adjusted income’ over £260,000, to a minimum AA of £10,000. • No Lifetime Allowance (LA) charge.
Personal Tax
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