Disaster Marriage Tax Allowance HMRC Claim

MikeSW2020

OK.  This marriage tax allowance claim has been a disaster and I probably have to blame myself for this.

I thought the HMRC online marriage tax allowance form would ensure the figures we entered for my partners details meet the criteria for transferring the allowance over to me or stop it from being processed, if we were not eligible.  I was hoping the HMRC system would raise a warning message saying that making this claim would result in owing more tax and so recommend to stop the process.  Oh boy was I wrong.

We submitted the claim and the online HMRC system said I am eligible for a tax refund and I have just received a cheque  from HMRC for £847.72

However, during the same post delivery my wife got a hefty letter from HMRC detailing a breakdown on what she owes to HMRC totalling £943.30 

What a disaster.  So we now owe more money to HMRC then before we started this exercise of transferring the marriage tax allowance.  If I could turn back the clock I would!

I take home less than £50k a year and we both thought my wife who is a teaching assistant did not exceed the personal tax allowance.  But it looks like each year she just goes over it.

So for example: 

2019-20 Total Income £13,234.93, Personal Tax Allowance £12,500, Income Tax Paid £145, Basic rate at 20% on £1984.00, Income Tax Payable £396.80 minus Tax already paid £145, Total we owe HMRC £251.80

2018-19 Total Income £12,719.36, Personal Tax Allowance £11,850, Income Tax Paid £322, Basic rate at 20% on £2059.00, Income Tax Payable £411.80 minus Tax already paid £322, Tax already repaid £148.20 - Total we owe HMRC £238.00

Is the Tax already repaid £148.20 amount the marriage tax allowance paid to me today ?

Can anyone explain where the Basic rate at 20% on £1984.00 comes from ?

Can I send the cheque back and just stop this whole thing from happening?

Thanks

Asghar

MikeSW2020 said:

Can anyone explain where the Basic rate at 20% on £1984.00 comes from ?

That would be the income of £13,234 minus the new Personal Allowance, (which would now be £11,250 after transfering 10% to you.)

Why claim marriage allowance if the person giving away their 10% is earning more the Personal Allowance, so they were in effect making full use of it?

zagfles

It's perfectly OK to transfer marriage allowance if you're both in basic rate band, just no point as it will usually cancel out, what one gains, the other loses. So HMRC have done no wrong.

For some reason in your case it's not quite cancelled out and there a discrepancy of about £100. Have you ever been in the higher rate band in the last few years? Or close to it? Note that it was lower than £50k in previous years and if you're Scottish it's still well under £50k. Include any interest/dividends even if tax free because of the allowances. Or does your wife earn large amounts of interest etc? 

Caz3121

MikeSW2020 said:

2019-20 Total Income £13,234.93, Personal Tax Allowance £12,500, Income Tax Paid £145, Basic rate at 20% on £1984.00, Income Tax Payable £396.80 minus Tax already paid £145, Total we owe HMRC £251.80

Can anyone explain where the Basic rate at 20% on £1984.00 comes from ?

when you use the marriage tax allowance you are transferring £1250 of your allowance to the other person
Personal Tax free allowance will reduce from £12,500 to £11,250 
 £13,234.93 minus allowance of £11,250 leaves £1,984.93

Information on Marriage Tax Allowance (and how to cancel for future years) here https://www.gov.uk/marriage-allowance

chrisbur

MikeSW2020 said:

So for example: 

2019-20 Total Income £13,234.93, Personal Tax Allowance £12,500, Income Tax Paid £145, Basic rate at 20% on £1984.00, Income Tax Payable £396.80 minus Tax already paid £145, Total we owe HMRC £251.80

2018-19 Total Income £12,719.36, Personal Tax Allowance £11,850, Income Tax Paid £322, Basic rate at 20% on £2059.00, Income Tax Payable £411.80 minus Tax already paid £322, Tax already repaid £148.20 - Total we owe HMRC £238.00

Is the Tax already repaid £148.20 amount the marriage tax allowance paid to me today ?

Can anyone explain where the Basic rate at 20% on £1984.00 comes from ?

Can I send the cheque back and just stop this whole thing from happening?

Thanks

"Tax already repaid £148.20"
2018/19 income 12719 less allowance 11850 is 869   Tax of 20% on 869 is 173.80  
Tax actually paid was 322   
322 less 173.80 is 148.20 which was presumably refunded some time ago.

" 20% on £1984.00"
2019/20 income 13234 less allowance of 11250 (12500 less 10% transferred) is 1984.00

With earnings over the personal allowance there is no benefit in doing this, indeed everyone will be a bit out of pocket as HMRC calculate the tax a bit more accurately than with PAYE.  Why yours came out this amount cannot say as only a few figures given would need full details.  Perhaps you were under-taxed somehow. One thought do you have any taxable expenses?

sheramber

we both thought my wife who is a teaching assistant did not exceed the personal tax allowance. 
So you didn't check her  P60s to find her actual arnings.

chrisbur

sheramber said:

we both thought my wife who is a teaching assistant did not exceed the personal tax allowance. 
So you didn't check her  P60s to find her actual arnings.

Or her payslips which would have shown tax being deducted each payday.
Full details needed from the OP to explain the large difference though.

cheekyemma

This has happened to me, I applied for marriage allowance and back dated it to 2019. I stupidly thought if there was any years I had earned over the threshold I would be ineligible and they wouldn’t apply the tax allowance. However, on the three years that I did earn over the threshold they applied the tax transfer anyway and now I owe over £1000! Is there any way to challenge this? Everything I’ve read says that if there are years that you are ineligible your application will be declined. Surely they shouldn’t have applied the rate to the years where I have earned over the threshold? 

Dazed_and_C0nfused

cheekyemma said:

This has happened to me, I applied for marriage allowance and back dated it to 2019. I stupidly thought if there was any years I had earned over the threshold I would be ineligible and they wouldn’t apply the tax allowance. However, on the three years that I did earn over the threshold they applied the tax transfer anyway and now I owe over £1000! Is there any way to challenge this? Everything I’ve read says that if there are years that you are ineligible your application will be declined. Surely they shouldn’t have applied the rate to the years where I have earned over the threshold? 

That is correct.

Unfortunately you have got confused between eligibility and being able to benefit (as a couple).

You would be eligible as long as you aren't a higher rate payer.

Is there any chance your spouse would pay the tax for you using their refund?

sheramber

You are only over the limit if  you are liable to pay tax at hiher rate.

While you now have a  tax charge presumably your wife got a refund.

As a couple  you are no worse off.