Married allowance/child benefit

cdbe11

I transferred the marriage allowance to my wife many years ago when I had a low income. Recently my income has been above the threshold but as it's possibly variable we've just left things as they were - which I understand was allowed. 

Wife just received a letter from HMRC saying she's underpaid tax in 23/24, reason stated "marriage allowance"

From what I can see, she's just become a higher rate taxpayer so loses the right to have my allowance.

Questions -

is the allowance automatically reverted back to me? I've been on HMRC website where it says I can cancel it online but when I follow the link it just only seems to allow me to transfer it to my wife???

Child benefit (paid to me) have we now lost this? Two children so  I think around £100/month?

I believe we can put a bit more into my wifes pension (TPS) to reduce her income for future years and that the child benefit system is changing a bit?

Just a bit shocked and don't know what to do (particularly for 23/24) think we could have lost a fair bit of money - is there anything we can do retrospectively 

Hopefully I've attached the paperwork from HMRC.

Any advice appreciated.

Dazed_and_C0nfused

is the allowance automatically reverted back to me? I've been on HMRC website where it says I can cancel it online but when I follow the link it just only seems to allow me to transfer it to my wife???

Yes, you will get the standard Personal Allowance again from 2023-24 onwards. 

There's nothing for you to cancel (unless you want to try and disturb years prior to 2022-23 and make your wife owe even more 🤔)

If you had a tax liability in 2023-24 with your reduced Personal Allowance then you can expect a refund in due course (or reduction in any tax you owe).  If you weren't liable to tax with the reduced Personal Allowance then it isn't really going to change anything for you for 2023-24.

You can transfer it again for years after 2023-24 but it is pointless if she will be a higher rate payer again in 2024-25.

Does she make Gift Aid contributions or relief at source (RAS) pension contributions?  RAS pension contributions are where basic rate tax relief is added to the contribution, most often with DC pensions.  Normal TPS contributions will not be RAS.

NB.  Owing £506 looks spot on for a year where she wasn't entitled to Marriage Allowance due to being higher rate.

But if you received Child Benefit why hasn't she registered for Self Assessment?? That could be a big issue if she should have done for 2023-24.

cdbe11

Thanks. Yes I did have a tax liability for 23/24 so hopefully I'll get a bit back.

Regards child benefit - looks like we've dropped one here - she's not been promoted for years but did get some kind of COVID catch up tutoring payment of £1500 and I suppose it's that and freezing of the allowance.

What are the consequences for us??  Sounds bad! The letter says they'll recover the £506 from her over the next year but no mention of the CB. I've found a calculator online that suggests we owe £300 odd. I suppose we need to ring HMRC and plead ignorance?

Dazed_and_C0nfused

cdbe11 said:

Thanks. Yes I did have a tax liability for 23/24 so hopefully I'll get a bit back.

Regards child benefit - looks like we've dropped one here - she's not been promoted for years but did get some kind of COVID catch up tutoring payment of £1500 and I suppose it's that and freezing of the allowance.

What are the consequences for us??  Sounds bad! The letter says they'll recover the £506 from her over the next year but no mention of the CB. I've found a calculator online that suggests we owe £300 odd. I suppose we need to ring HMRC and plead ignorance?

No.  As we haven't reached October yet she needs to do a few things now.  Ignoring this until after 5th October is to be avoided.

Firstly register for Self Assessment for 2023-24.  Now.

Secondly she should then contact HMRC and ask them to cancel the P800 for 2023-24 as you cannot be assessed under both PAYE and Self Assessment for the same tax year.  Don't try doing this until after she has registered for Self Assessment (this is the proof the P800 is no longer applicable).

Thirdly she needs to decide if she wants to pay the total she will owe under Self Assessment (minimum £800?) in January or have it collected via her 2025-26 tax code.  There is a question she must answer on the return about this.

Some people are happy delaying payment as long as possible, i.e. via next year's tax code.  Others prefer to get it out of the way and avoid their tax code being messed with.

Lastly she needs to file the Self Assesment return for 2023-24.  If she wants to have the tax owed included in her 2025-26 tax code she must file the return by 30 December 2024.  If she wants to pay it direct the normal filing deadline of 31 January 2025 applied.

cdbe11

Thanks. I appreciate your advice.