Cancelling marriage allowance query

Bossworld

Found the guide on the main MSE website which usefully advises that:

"technically this transfer doesn't increase the threshold at which they'd need to start paying higher rate tax, nor does it increase their own amount of personal allowance."

I'm therefore in a situation where I believe I'm looking at a couple of tax inefficient cliff edges thanks to the potential loss of marriage allowance and the HICBC taper.

Does anyone know if you cancel marriage allowance in-year, whether its resolved that same year via a tax code adjustment, or via some other means?

HMRC website states that if you cancel due to a change in income, it runs until the end of the year... but in the same paragraph mentions that this means you may underpay tax for the year.

Thank you

Dazed_and_C0nfused

Who do you propose cancels it?

You (the recipient) or your spouse (the applicant)?

Bossworld

Phone isn't playing nicely with the quote functionality

Whichever route resolves the issue, bearing in mind this is an income change rather than a relationship breakdown. Most discussion online, and subsequent mention of backdating to April 6, relates to the latter.

Dazed_and_C0nfused said:

Who do you propose cancels it?

You (the recipient) or your spouse (the applicant)?

Dazed_and_C0nfused

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

It most likely any tax owed will be calculated as part of your 2022:23 Self Assessment return.

Bossworld

Yes that's the source of the ambiguous paragraph I mentioned. I'll give them a call when I get chance, was just in case anyone on this board had been through the process 

sheramber

Bossworld said:

Yes that's the source of the ambiguous paragraph I mentioned. I'll give them a call when I get chance, was just in case anyone on this board had been through the process 

What is ambiguous aboutEither of you can cancel if your relationship has ended.

If you’re cancelling for another reason, the person who made the claim must cancel.

if your income rises meaning you are no longer  eligible for  the allowance  it is withdrawn for the whole year.  Therefore you will already have underpaid tax for the months you have had the allowance.  

HMRC will  re assess your liability after the end of the year and advise you of the resulting underpayment.

Dazed_and_C0nfused

Which may be significantly more than you envisage because HMRC allow Marriage Allowance as a tax code allowance in year so you could receive 40% relief rather than the fixed £252 which is actually due (to someone eligible).

Bossworld

I give up with trying to forum quote from a mobile as it's snapping the reply to the quote block.

The HMRC site in reference is the "After you cancel" section where you have two different conditional statements referring to M1 and M12 based on different scenarios, followed by "This might mean you or your partner underpays tax for the year." Clearly if they backdate you will owe tax.

Again, the reason for my post, is whether them advising it will run to the end of the year just means they will not/cannot issue new tax codes for this cancellation mid-year. 

Sheramber - You've stated it won't stand - I've had another search and Which agrees with you that it will be withdrawn though handled by a tax code change the next year https://www.which.co.uk/money/tax/income-tax/tax-rates-and-allowances/marriage-allowance-explained-aRBxq9B7cO1J#marriage-allowance-your-questions-answered

Either way, if you're paying off a student loan, currently receive child benefit and have set up marriage allowance, there is little incentive to let your taxable income go a grand or so over £50,099 (or £50,270 if you don't mind filling out the paper work to hand back ~£37).

Dazed_and_C0nfused

It doesn't really matter what gov.uk says, the legislation means that if you are liable to higher rate tax.  Or would be if it weren't for the dividend nil rate band (aka Dividend Allowance) you will be ineligible for Marriage Allowance.

So when the final position for the tax year is known, either by completion of a Self Assessment return or HMRC's annual review of people who don't complete Self Assessment return is done it will be cancelled from that year onwards.

By notifying HMRC in advance you are ensuring a tax underpayment isn't building up for more than the current tax year.

This is a better source of information.  Although for some odd reason they refer to being able to "claim" it.  Which you definitely can't do as that would allow unscrupulous spouse's to force their spouses to pay more tax than they needed to 😳

https://www.litrg.org.uk/tax-guides/tax-basics/what-tax-allowances-am-i-entitled#toc-what-is-the-marriage-allowance-transferable-tax-allowance-for-married-couples-and-civil-partners-