Marriage allowance

Bigror

On reading about it in this place I submitted a claim to transfer part of my tax-free allowance to my wife. One of the examples given seemed to mirror our particular incomes etc so we were confident in submitting the claim. To our dismay, we have both now been sent notices from HMRC saying WE owe them money for the back-years I also claimed for. In y case I owe c £1,000 but in my wife's case (she being the higher income) they are looking her to pay c £2,500!!!! We are very shocked and never would have submitted the claim if we knew this. Is there a way of telling HMRC that I want to withdraw the claim, including the back-years?

TadleyBaggie

Needs moving to the "Cutting Tax" section, this section is for feedback on the MSE site itself.

MSE_Laura_F

Moved - thank you.

molerat

Strange that you both owe tax. Is that £1K and £2.5K underpaid tax or those amounts to be taxed, a completely different scenario ? What were you incomes in each of those past tax years ? Is / was your wife a higher rate tax payer ? Did the back refunds get sent as a cheque ? Unwinding what has been done is not impossible but will not be easy as it is likely down to your error and not HMRC's. What is possible and allowable is not necessarily beneficial.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6443827/marriage-allowance

Perhaps you could clarify a couple of points.

For yourself, the applicant, were you doing this on the basis that it would have no impact on you i.e. you had more than enough spare Personal Allowance to not need to pay tax.

Or was iton the basis that you would owe some tax but your spouse would get a larger refund i.e. as a couple you would be better off overall?

Also have either of you previously been notified of tax underpayments for any of the tax years you have now received notices for?

What exactly are these notices?

Have you read through them in detail yet?

Have you found any mistakes in them?

Bigror

My income was £11,220 and my wife's was (roughly) £18,384. I was moving £1,260 of my unused personal allowance (£12,570) to my wife. I thought this was precisely what it was for, and it seemed to fit one of the scenarios laid out that would benefit us both. I appreciated that I might have to pay something back as I have been getting tax refunds every year. But I thought this would be offset by my wife then paying less tax for the back-years that she has always been billed for, and paid. The bills she has been sent do this:

Total income £17,575, less Personal alloance -£12,570 = £5,005. Incometax thereon = £1,001. (She paid this amount)

The HMRC has deducted £252 (which is also what they have asked me to pay) from the £1,001, giving £749. And they now say she has to pay £749!

And they've done the same thing for the 4 back-years!

Does this seem right?

Jeremy535897

For any year that you had income of at least £12,570, transferring marriage allowance to your wife would have no benefit, because for every £1 extra she gained (a maximum of £252 being £1,260 at 20%) you would pay £1 in tax.

For example: before you transferred marriage allowance say your taxable income was £13,000 less £12,570 personal allowance= £430 at 20% = £86.

After marriage allowance your tax is £13,000 - £11,310 reduced personal allowance = £1,690 at 20% =£338.

Your wife's tax falls from £1,001 to £749, but she still has to pay the £749, unless she had already paid the £1,001, in which case she is due a refund of £252. It may simply be that HMRC have overlooked that your wife had already paid the £1,001?

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/80028900#Comment_80028900

I think you are getting confused between a "bill" and a new calculation.

Was your wife receiving Simple Assessment calculations by any chance? If so they won't take into account money she has paid direct to HMRC. So if the original calculation showed tax due of £1,001 and the new one shows tax due of £749 then she has saved £252.

Not sure about the process for getting that £252 back but I honestly think you have misunderstood something somewhere.

What about your situation? You claimed you owe £1,000. Have you checked each calculation? Can you provide more information about the individual calculations?

Bigror

Each year for many years now I have rec'd a tax refund for approx £2,000. This was clearly because they had taxed me but then at year-end realised that I had 'earned' less than the £12,570, and then refunded me.

Alternatively my wife underpaid tax each year as she had 2 sources of income, neither of which were over the personal allowance limit, but when combined they were. She was sent a tax bill each year and she paid it. We had no problems until I applied to trasfer my excess personal allowance to her.

On looking at what they have now sent me, it shows that actually my income has been over the personal allowance. Is that the problem for me? I had taken my monthly works pension and multiplied it by 12. The total was less than £12,570. However if I've done this wrong then I understand why they want tax back from me.

However my wife's simple assessment tax calculations for the past 4 years show Income, less personal allowance, giving a net amount, £1,001 above. Then "less other allowances due" £252. They have subtracted the £252 from the £1,001 and say that she owes £749. But, she paid the £1,001! Shouldn't the £749 be a refund due to her?

The figures are similar in previous years, but each year they say that my wife owes HMRC! If I have given her some of my Personal allowance each of those 4 years, then how can she end up having to more tax?

I have stopped this now btw as I have been given an increase in my pension which has moved me even further over the personal allowance threshold.

I wish I could go back and just withdraw the entire claim. We've now been given a joint tax demand for close to £3.5k! I really appreciate any help out there.

Dazed_and_C0nfused

However my wife's simple assessment tax calculations for the past 4 years show Income, less personal allowance, giving a net amount, £1,001 above. Then "less other allowances due" £252. They have subtracted the £252 from the £1,001 and say that she owes £749. But, she paid the £1,001! Shouldn't the £749 be a refund due to her?

Pretty sure you have got the wrong end of the stick here. The original liability was £1,001. The new liability, factoring in Marriage Allowance, is £749. That is a £252 reduction so no idea why you think a refund of £749 would be due (for that one tax year).

It seems to me that if she has paid £1,001 direct to HMRC then she is due £252 back for that one year.

Are the other years following a similar pattern?

If so why not add up her refunds and compare that to the tax you owe.

xylophone

Each year for many years now I have rec'd a tax refund for approx £2,000. This was clearly because they had taxed me but then at year-end realised that I had 'earned' less than the £12,570, and then refunded me.

Many years....

https://www.gov.uk/government/publications/rates-and-allowances-income-tax/income-tax-rates-and-allowances-current-and-past

Do you mean that for "many years" your  total taxable income has been under the personal allowance?

Has this income always been from once source and that source was your pension?

If so, is there any reason why the tax code on your pension has always been too low?