Marriage Allowance

Dazed_and_C0nfused

VocuherQueen said:

I have recently started to receive my state pension.  I have two very small pensions too. I transferred the marriage allowance to my husband in 2015.   Today I received a payslip & have paid tax.  As my husband's pension is less than £12,570 he doesn't pay tax so there is no need for him having my allowance.  I've gone online and cancelled it but it says it will continue til the next tax year. April 2022.  So I've ended up paying tax that I shouldn't really have to. Any suggestions/help?

No, you're paying tax in accordance with your Marriage Allowance application.

But given your husband apparently isn't liable to tax then it may be worth a call to HMRC to see if they will agree to accept the cancellation with effect from the start of the current tax year?

https://www.gov.uk/marriage-allowance/if-your-circumstances-change

sheramber

Jeremy535897 said:

polymaff said:

VocuherQueen said:

I have recently started to receive my state pension.  I have two very small pensions too. I transferred the marriage allowance to my husband in 2015.   Today I received a payslip & have paid tax.  As my husband's pension is less than £12,570 he doesn't pay tax so there is no need for him having my allowance.  I've gone online and cancelled it but it says it will continue til the next tax year. April 2022.  So I've ended up paying tax that I shouldn't really have to. Any suggestions/help?

https://www.gov.uk/marriage-allowance/if-your-circumstances-change

"If you cancel because of a change of income, the allowance will run until the end of the tax year (5 April)."

So that's why you are being taxed.

Electing for MAT when your spouse wouldn't be paying tax anyway, seems a bit odd.

I have seen a suggestion that husband could transfer 10% of his allowance to you, thus nullifying the effect in the current year, but I don't know if it works. It might be sensible anyway if he will be a non-taxpayer and you are a taxpayer.

I did this albeit in a different  scenario.

 MA was transferred to my husband for 2019/20.

He died Sept 2019 and MA was credited back to me but he kept it as well.

His income for 6 months was below the Personal Allowance.( without taking MA into account)

As I paid tax 2019 due to pension lump sum payments I , as executor, asked to transfer MA to me  which was done.

Shell5

I'd advise calling them if you want to cancel the allowance and confirming that it will only be cancelled going forward.  I cancelled online in Jan 20 wef 6th April 2020 and my husband has now received tax demands back to 17/18 tax year as the system cancelled it out completely and it is backdating his tax!!!   All sorted now, but it was a nightmare trying to get them to sort it.  

Jeremy535897

sheramber said:

Jeremy535897 said:

polymaff said:

VocuherQueen said:

I have recently started to receive my state pension.  I have two very small pensions too. I transferred the marriage allowance to my husband in 2015.   Today I received a payslip & have paid tax.  As my husband's pension is less than £12,570 he doesn't pay tax so there is no need for him having my allowance.  I've gone online and cancelled it but it says it will continue til the next tax year. April 2022.  So I've ended up paying tax that I shouldn't really have to. Any suggestions/help?

https://www.gov.uk/marriage-allowance/if-your-circumstances-change

"If you cancel because of a change of income, the allowance will run until the end of the tax year (5 April)."

So that's why you are being taxed.

Electing for MAT when your spouse wouldn't be paying tax anyway, seems a bit odd.

I have seen a suggestion that husband could transfer 10% of his allowance to you, thus nullifying the effect in the current year, but I don't know if it works. It might be sensible anyway if he will be a non-taxpayer and you are a taxpayer.

I did this albeit in a different  scenario.

 MA was transferred to my husband for 2019/20.

He died Sept 2019 and MA was credited back to me but he kept it as well.

His income for 6 months was below the Personal Allowance.( without taking MA into account)

As I paid tax 2019 due to pension lump sum payments I , as executor, asked to transfer MA to me  which was done.

In these unfortunate circumstances you can change it for the current tax year, but normally it is only for future years.

slowcyclist

My wife and I married in June 2019, at which point I was a basic rate tax payer.  We have not yet claimed the MA as our intention was to let it accrue and then claim it after 3 or 4 years in order to receive a lump-sum to put towards a holiday.  Last financial year my income unexpectedly crept about £250 into the higher rate band because of a company share scheme.  This year my income, again because of the share scheme, will be about £1k into the higher rate band.  My questions:
1. Can we retrospectively claim MA for the June 2019 to April 2020 period that we were married and I was a basic rate tax payer?
2. The share scheme rules require me to pay the employer's NIC contribution on the market value of the shares awarded to me in addition to the employee's NIC and income tax. This is funded by selling a proportion of the shares immediately on receipt and is payable regardless of whether I sell or retain the remaining shares.  For FY 2020-2021, after paying the employer's NIC contribution, but before paying employee's NIC and IT my gross (or is it semi-net?) income would be just below the higher rate tax band.  Would this make me/us eligible for MA or is it calculated on the (gross)gross income?

Many thanks.

Dazed_and_C0nfused

1.  No "We" cannot claim anything for part of a tax year.  Your wife can apply for Marriage Allowance for a single, entire, tax year if she wishes.  You, as recipient of the Marriage Allowance tax credit have no say in this.

2.  Entitlement to MA is based on what tax rate you are liable at.  So earn say £70k and pay £25k into a pension scheme will make you eligible as you would be a basic rate taxpayer.  Same for you wife, providing she isn't a higher rate payer she is eligible (as applicant or recipient).

Different figures will apply if you are Scottish resident for tax purposes.

sheramber

You do realise 'Marriage Allowance' is not an extra allowance?

Transferring Marriage Allowance means the person who transfer the allowance loses that part of their personal allowances.

slowcyclist

sheramber said:

You do realise 'Marriage Allowance' is not an extra allowance?

Transferring Marriage Allowance means the person who transfer the allowance loses that part of their personal allowances.

Not sure if your comment is in response to my question, but if so, yes I am fully aware of that and thanks for the reply.  My wife is in low paid part time employment and with an annual income of around £6k does not pay tax.

slowcyclist

Dazed_and_C0nfused said:

1.  No "We" cannot claim anything for part of a tax year.  Your wife can apply for Marriage Allowance for a single, entire, tax year if she wishes.  You, as recipient of the Marriage Allowance tax credit have no say in this.

2.  Entitlement to MA is based on what tax rate you are liable at.  So earn say £70k and pay £25k into a pension scheme will make you eligible as you would be a basic rate taxpayer.  Same for you wife, providing she isn't a higher rate payer she is eligible (as applicant or recipient).

Different figures will apply if you are Scottish resident for tax purposes.

Thanks for the reply and apologies for my poor choice of words. 

To rephrase my first question:  My understanding is that had my wife made the application for MA shortly after our wedding the application is likely to have been successful because her salary was such that she did not pay income tax and my salary, after the personal allowance, attracted income tax at the basic rate.  Given that last year I paid tax at the higher rate, and this year am likely to do the same, unless I increase my pension contributions to keep me below the threshold for higher rate, if my wife were to apply for MA, is a claim likely to be successful and retrospectively applied to the 2019-2020 tax year, or does the fact that I am currently a higher rate tax payer mean that any claim will be dismissed? 

Dazed_and_C0nfused

In year applications are always successful as HMRC only check if you are a higher rate payer once the facts are known after the end of the tax year.

You might have earned £30k by July and be on track to a higher rate payer but that could include an annual bonus of £20k.

HMRC check after the year end and if they identify you (or your wife) were higher rate payers they would cancel the application and ask you to pay back any tax reduction already received.

So if you are confident you were not a higher rate payer in 2019:20 your wife could apply and her tax will be recalculated using the reduced Personal Allowance (possibly no change due) and yours will be as well with you getting the Marriage Allowance credit.  Likely refund would be £248 or so, assuming you don't owe anything other than normal £2 or so people on PAYE tend to owe each year.