Marriage Allowance

Keniff13

Hi All, looking for some advice re Marriage Allowance. My Wife transferred the allowance to me but now our incomes are about to change. I am finishing a draw down pension, which took me over the current personal allowance, when added to my employer pension. She is just about to receive her state pension, on top of her employer pension, which will take her over the personal allowance. We are assuming that we would be better off her cancelling the transfer. However, when I spoke to HMRC today they said if we cancel it now then I will have a shortfall of tax that will need to be recovered. Question is do we cancel the transfer now or wait until the end of the tax year. Hope that makes sense?????? Cheers

TadleyBaggie

If you cancel it online, it doesn’t change until the next tax year. 

sheramber

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).

Keniff13

sheramber said:

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).

Thanks for the info and link. When I've looked at that the full text says about a possible underpayment of tax:

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

If your relationship has ended, the change may be backdated to the start of the tax year (6 April).

This might mean you or your partner underpays tax for the year.

Or does the 3rd line only apply to the 2nd line statement about end of relationship? Although this possible underpayment would concur with what HMRC told me yesterday. Or have they got it wrong?

Dazed_and_C0nfused

Any underpayment will depend on exactly what income you each have.

Your wife is unlikely to underpay as she receive an increased Personal Allowance.

But you might underpay as you will lose the Marriage Allowance tax credit.

What do you expect your total taxable income to be in the current tax year?  And your wife's?

Does your wife actually need the increased Personal Allowance in the current tax year when the State Pension is only being paid for part of the (tax) year?

sheramber

Dazed_and_C0nfused said

Any underpayment will depend on exactly what income you each have.

Your wife is unlikely to underpay as she receive an increased Personal Allowance.

But you might underpay as you will lose the Marriage Allowance tax credit.

What do you expect your total taxable income to be in the current tax year?  And your wife's?

Does your wife actually need the increased Personal Allowance in the current tax year when the State Pension is only being paid for part of the (tax) year?

As it is a change of income the allowance will continue as claimed until the end of the tax year so husband will keep the allowance until 5  April, even if he cancels it tomorrow. So he will not have any underpayment as nothing will change. Wife will not get the allowance until next tax year. 

Dazed_and_C0nfused

sheramber said:

Dazed_and_C0nfused said

Any underpayment will depend on exactly what income you each have.

Your wife is unlikely to underpay as she receive an increased Personal Allowance.

But you might underpay as you will lose the Marriage Allowance tax credit.

What do you expect your total taxable income to be in the current tax year?  And your wife's?

Does your wife actually need the increased Personal Allowance in the current tax year when the State Pension is only being paid for part of the (tax) year?

As it is a change of income the allowance will continue as claimed until the end of the tax year so husband will keep the allowance until 5  April, even if he cancels it tomorrow. So he will not have any underpayment as nothing will change. Wife will not get the allowance until next tax year. 

I know that's the standard approach but if the recipients income had dropped sufficiently that they couldn't benefit from it and the applicants income had increased so they could benefit from having the standard Personal Allowance then I'm pretty sure HMRC would allow an in year change.

sheramber

Dazed_and_C0nfused said:

sheramber said:

Dazed_and_C0nfused said

Any underpayment will depend on exactly what income you each have.

Your wife is unlikely to underpay as she receive an increased Personal Allowance.

But you might underpay as you will lose the Marriage Allowance tax credit.

What do you expect your total taxable income to be in the current tax year?  And your wife's?

Does your wife actually need the increased Personal Allowance in the current tax year when the State Pension is only being paid for part of the (tax) year?

As it is a change of income the allowance will continue as claimed until the end of the tax year so husband will keep the allowance until 5  April, even if he cancels it tomorrow. So he will not have any underpayment as nothing will change. Wife will not get the allowance until next tax year. 

I know that's the standard approach but if the recipients income had dropped sufficiently that they couldn't benefit from it and the applicants income had increased so they could benefit from having the standard Personal Allowance then I'm pretty sure HMRC would allow an in year change.

You have great faith in HMRC bending the rules.  If the husband’s income is such that he can transfer part of his allowance to his wife he can do that. He keeps the marriage allowance he already has but transfers part of his personal allowance to his wife. She still loses the marriage allowance she transferred but gains marriage allowance from her husband. 

Dazed_and_C0nfused

sheramber said:

Dazed_and_C0nfused said:

sheramber said:

Dazed_and_C0nfused said

Any underpayment will depend on exactly what income you each have.

Your wife is unlikely to underpay as she receive an increased Personal Allowance.

But you might underpay as you will lose the Marriage Allowance tax credit.

What do you expect your total taxable income to be in the current tax year?  And your wife's?

Does your wife actually need the increased Personal Allowance in the current tax year when the State Pension is only being paid for part of the (tax) year?

As it is a change of income the allowance will continue as claimed until the end of the tax year so husband will keep the allowance until 5  April, even if he cancels it tomorrow. So he will not have any underpayment as nothing will change. Wife will not get the allowance until next tax year. 

I know that's the standard approach but if the recipients income had dropped sufficiently that they couldn't benefit from it and the applicants income had increased so they could benefit from having the standard Personal Allowance then I'm pretty sure HMRC would allow an in year change.

You have great faith in HMRC bending the rules.  If the husband’s income is such that he can transfer part of his allowance to his wife he can do that. He keeps the marriage allowance he already has but transfers part of his personal allowance to his wife. She still loses the marriage allowance she transferred but gains marriage allowance from her husband. 

I suspect this line from gov.uk is their get out of jail free card.

If your income changes and you’re not sure if you should still claim, call HMRC Marriage Allowance enquiries.

And their systems would go into melt down if the recipient then applied themselves for the same tax year as they are receiving Marriage Allowance!!

Keniff13

Thanks for the info guys. Just goes to show how confusing it all is. Think we'll cancel the transfer now and see what happens. If it does stay on my code until the end of the tax year then happy days, but if not and I pay a little more my wife will probably get that back with the increase in her allowance. Probably only be a tiny difference if any. Cheers

sheramber

Dazed_and_C0nfused said:

sheramber said:

Dazed_and_C0nfused said:

sheramber said:

Dazed_and_C0nfused said

Any underpayment will depend on exactly what income you each have.

Your wife is unlikely to underpay as she receive an increased Personal Allowance.

But you might underpay as you will lose the Marriage Allowance tax credit.

What do you expect your total taxable income to be in the current tax year?  And your wife's?

Does your wife actually need the increased Personal Allowance in the current tax year when the State Pension is only being paid for part of the (tax) year?

As it is a change of income the allowance will continue as claimed until the end of the tax year so husband will keep the allowance until 5  April, even if he cancels it tomorrow. So he will not have any underpayment as nothing will change. Wife will not get the allowance until next tax year. 

I know that's the standard approach but if the recipients income had dropped sufficiently that they couldn't benefit from it and the applicants income had increased so they could benefit from having the standard Personal Allowance then I'm pretty sure HMRC would allow an in year change.

You have great faith in HMRC bending the rules.  If the husband’s income is such that he can transfer part of his allowance to his wife he can do that. He keeps the marriage allowance he already has but transfers part of his personal allowance to his wife. She still loses the marriage allowance she transferred but gains marriage allowance from her husband. 

I suspect this line from gov.uk is their get out of jail free card.

If your income changes and you’re not sure if you should still claim, call HMRC Marriage Allowance enquiries.

And their systems would go into melt down if the recipient then applied themselves for the same tax year as they are receiving Marriage Allowance!!

I did it with ni problems.