Marriage Allowance

polymaff

pursebearer wrote: »

I've discovered that thousands of people, maybe tens of thousands, are being given wrong information by HMRC. I received a P800 from them which is supposed to show clearly how your tax code is calculated. However it only shows the standard personal allowance despite the fact that I have elected to transfer the married allowance from my wife (her code was correctly reduced of course). I called the customer service and was told this is normal but the tax calculation is in fact correct. I asked for a corrected P800 but when it came it was exactly the same.

You didn't mean that, did you? It would be your wife who elected - not you. That is assuming that you did mean "from my wife" and not "to my wife". Very confusing. In fact the recipient has no part in the MAT process other than to receive a credit to their tax account. Being the recipient of such a credit has no effect upon their tax assessment. Penny starting to drop?

Consumerist

polymaff wrote: »

. . . Being the recipient of such a credit has no effect upon their tax assessment. Penny starting to drop?

The penny hasn't dropped for me yet.

If the donor has had their PA decreased by the MA then surely the recipient's PA should have increased by the same amount.

Have I got that wrong?

polymaff

Consumerist wrote: »

The penny hasn't dropped for me yet.

If the donor has had their PA decreased by the MA then surely the recipient's PA should have increased by the same amount.

Have I got that wrong?

AAUI, yes. The recipient receives a credit - this year of £1,100. The credit is applied to the recipient's tax account just as a £1,100 tax over-payment repayment would be. The recipient's Personal Allowance - present or future - remains entirely unaffected.

pursebearer

Ok, Of course pedantically my wife elected to transfer part of HER allowance to MINE, but explain this calculation on my P800 (my comments in brackets):
Total income: £22031.14
Personal allowance: £10600
Total tax free amount: £10600 (incorrect, excludes transfered allowance)
Total taxable income: £11431 (incorrect due to above)
Income tax (20% of 11430) = £2286 (incorrect due to above)
Adjustment (unpaid tax from previous year): £106.86 (correct)
Total tax payable: £2180.86 (they assure me this is correct?)
(Note that the underpaid tax has been SUBTRACTED from the tax due)

xylophone

Does your/your wife's tax code show a suffix/adjustment?

http://www.rossmartin.co.uk/private-client-a-estate-planning/income-losses-claims-reliefs/1528-transferable-married-couples-allowance



https://ion.icaew.com/taxfaculty/b/weblog/posts/the-mechanics-of-the-marriage-allowance?Redirected=true

polymaff

pursebearer wrote: »

Ok, Of course pedantically my wife elected to transfer part of HER allowance to MINE, but explain this calculation on my P800 (my comments in brackets):
Total income: £22031.14
Personal allowance: £10600
Total tax free amount: £10600 (incorrect, excludes transfered allowance)
Total taxable income: £11431 (incorrect due to above)
Income tax (20% of 11430) = £2286 (incorrect due to above)
Adjustment (unpaid tax from previous year): £106.86 (correct)
Total tax payable: £2180.86 (they assure me this is correct?)
(Note that the underpaid tax has been SUBTRACTED from the tax due)

Prepare to feel a twerp, pursebearer:

Income tax due for current:: £2286.00
Adjustment, tax due previous:£ 106.86

The sum of these amounts is: £2392.86

So, subtotal due:::: £2392.86

Less MAT transfer in: £212.00

Payment due::::::::: £2180.86

polymaff

xylophone wrote: »

https://ion.icaew.com/taxfaculty/b/weblog/posts/the-mechanics-of-the-marriage-allowance?Redirected=true

That is a remarkably good exposition of MAT. I've spent(/wasted?) a lot of time on MSE and on professional sites trying to get folk used to the idea that HMRC's version of the facts of MAT is a complete misinterpretation of the relevant parts of the Finance Act and Income Tax Act. Everyone on this thread should try to find time to read it.

Dazed_and_confused

Polymaff,
Prepare to feel a twerp, pursebearer:

Income tax due for current:: £2286.00
Adjustment, tax due previous:£ 106.86

The sum of these amounts is: £2392.86

So, subtotal due:::: £2392.86

Less MAT transfer in: £212.00

Payment due::::::::: £2180.86

Nice explanation, I see how it works now as a tax reducer rather than increasing the personal allowance when you're the receiver.

To be fair to pursebearer though it would have helped if his figures had explicitly included the tax reducer rather than needing a calculator and understanding of an underpayment being added to the bill not taken away to get to the right answer!!

polymaff

Dazed_and_confused wrote: »

Nice explanation, I see how it works now as a tax reducer rather than increasing the personal allowance when you're the receiver.

To be fair to pursebearer though it would have helped if his figures had explicitly included the tax reducer rather than needing a calculator and understanding of an underpayment being added to the bill not taken away to get to the right answer!!

Thank you. It took longer to format that information than to work it out! MSE makes it quite difficult to monospace text - even if you select a monospace font. Hence the use of multiple colons.

MAT is the blind leading the blind when one looks at HMRC's guidance. In particular, leaving aside how the recipient receives the benefit, there is also the matter of how one qualifies as an MAT donor.

HMRC's line that the donor must have "an income of £11,000 or less" is a complete fiction. The legislation doesn't include any such provision and, although I have read postings suggesting that there would be no benefit in such tax-payers so doing, one can think of scenarios where the taxable income was, say, three times that figure where a MAT would be of nett benefit.

And this is supposed to be the Age of Tax Simplification. :rotfl:

AnnetteR

After the show last week I applied for marriage allowance as i currently do not earn enough to pay tax from august 16. I received an email saying i was eligible. My husband received a cheque for 202.00 and i received a bill from the tax office saying i owed them 212.00. On completion of my application i received an email confirming eligibilty also stating claiming HMRC will check your eligibility before processing your application. Now we had to cash the cheque and pay it back to hmrc. I rang them and they said that I owed them the money because I applied for the marriage allowance so the whole process just cost me 10.00