HMRC over allocated marriage allowance resulting in underpaid tac

Baffledbyitall

I have been receiving the transfer of my wife's personal allowance under the marriage allowance scheme for several years now with no issue.

However I retired in August 2024 and received a P800 for tax year 2023-2024 stating I owed £518 in under paid tax, explanation -

Marriage Allowance

You were given more Marriage Allowance than you should have been.

My tax code changed for the HRMC to reclaim the tax, I wasn't happy but accepted it needed paying.
I have now received another P800 for tax year 2024 - 2025 that I owed £851 in under paid tax, explanation - 

Marriage Allowance

You were given more Marriage Allowance than you should have been.

Tax from earlier year

This calculation includes tax you owe HMRC for an earlier year. We have shown this in the Adjustments section of your tax calculation letter.

Does this mean that I will keep receiving p800 letters year on year that I have not paid enough tax?
Is there anything I should do to prevent this?

Any advice would be greatly appreciated.

Dazed_and_C0nfused

Baffledbyitall said:

I have been receiving the transfer of my wife's personal allowance under the marriage allowance scheme for several years now with no issue.

However I retired in August 2024 and received a P800 for tax year 2023-2024 stating I owed £518 in under paid tax, explanation -

Marriage Allowance

You were given more Marriage Allowance than you should have been.

My tax code changed for the HRMC to reclaim the tax, I wasn't happy but accepted it needed paying.
I have now received another P800 for tax year 2024 - 2025 that I owed £851 in under paid tax, explanation - 

Marriage Allowance

You were given more Marriage Allowance than you should have been.

Tax from earlier year

This calculation includes tax you owe HMRC for an earlier year. We have shown this in the Adjustments section of your tax calculation letter.

Does this mean that I will keep receiving p800 letters year on year that I have not paid enough tax?
Is there anything I should do to prevent this?

Any advice would be greatly appreciated.

Has Marriage Allowance not now been removed from your 2025-26 tax code 🤔

Baffledbyitall

Not sure if the Marriage Allowance has been removed, I have two private pensions the larger one has a tax code of CK312 and the other has the basic rate of tax code CBR and I don't pay tax on my state pension.
Incidently my wife has also retired but she doesn't get the full state pension.
Thanks for the reply

sheramber

Are you a higher rate taxpayer?

If the Marriage Transfer .Allowance is still in your coding and you are not due to receive it, then you will be underpaid each year. 

If it is no longer due your wife will have to cancel the allowance. 

This can be done online. 

Baffledbyitall

No, I am not a higher rate taxpayer. my total income for 2024 - 2025 was £37,951 (including pensions)
Takes into  account I was still employed up 1st August 2024 then retired with full state pension and two modest pensions

My income for 2023 - 2024 was £41,906 tax code C1381M although I was drawing one of my pensions with tax code CBR for £9.673.

sheramber

It woukd help to know the figures used in the calculation.

can you scan or copy the calculation for each  year omitting any personal information, reference, Ni no etc.

JGB1955

I think that, unless your wife cancels her transfer of allowance to you, you will continue to rack up a tax bill...

Nomunnofun1

sheramber said:

It woukd help to know the figures used in the calculation.

can you scan or copy the calculation for each  year omitting any personal information, reference, Ni no etc.

I believe the poster will need around ten posts to be able to do that.

Dazed_and_C0nfused

JGB1955 said:

I think that, unless your wife cancels her transfer of allowance to you, you will continue to rack up a tax bill...

I would be fairly certain the wife needs to apply for Marriage Allowance, not cancel anything.

Based on the info the op has supplied so far this could well be what has happened.

After the end of the 2023-24 tax year HMRC review that year and identify the op is a higher rate payer.  So they issue a calculation for 2023-24 showing ~£500 tax is owed (as the op is ineligible for Marriage Allowance).

At about the same time they also cancel the Marriage Allowance for the 2024-25 (and later) years.  That happens be side of the op being a higher rate payer in the prior tax year.  HMRC may have tried to recoup some of the tax owed for 2024-25 during the rest of 2024-25.

After the end of the 2024-25 tax year HMRC review that year with all the actual income details and find the op owed an extra ~£350 for 2024-25.

I suspect if the op can check their Personal Tax Account they will find the current, 2025-26, tax code of CK312 is collecting some or all of the £851 they owe and does not include Marriage Allowance.

However as they appear to have only been a higher rate payer for 2023-24 it might be worth the op seeing if his wife is willing to apply for Marriage Allowance again for 2024-25 and 2025-26.

Assuming it is beneficial (as a couple) for her to that they it will knock £252 off the tax owed and improve the tax code for the current tax year.

It would be prudent for their op to think carefully about how much taxable income they will actually in the current tax year as most pensions have increased but the basic rate has remained static and it is pointless for her to apply for 2025-26 if the op won't ultimately be eligible.

Nomunnofun1

Baffledbyitall said:

No, I am not a higher rate taxpayer. my total income for 2024 - 2025 was £37,951 (including pensions)
Takes into  account I was still employed up 1st August 2024 then retired with full state pension and two modest pensions

My income for 2023 - 2024 was £41,906 tax code C1381M although I was drawing one of my pensions with tax code CBR for £9.673.

Was the income, therefore, £51579? That would make you a higher rate taxpayer!

In that case, as you received 10% of your wife’s allowance, 1260, your underpayment as a result of that is £504. (£1260 at 40%)

Moreover, insufficient tax was taken at your pension. A BR code was applied when a tiny amount should have been taxed at 40%. 

You are £1309 above the higher rate threshold of £50270. Deduct the marriage allowance of £1260 (already accounted for above) and this means that an additional £49 of income was taxed at 20% when it should have been 40%. 20% of £49 is £9.80.

So - add £504 to £9.80 - £513.80! That’s close to the underpayment within PAYE tolerances. 

Baffledbyitall

thanks Nomunnofun1,
That makes sense for the tax year 2023-2024 as you say my earnings must have just crept into the higher tax rate threshold and your figures match the p800 total of £518 that was underpaid,

But I dont understand the p800 I have just received stating I have under paid my tax by £812 for the tax year 2024-20225, my earnings were below the threshold at £37,951 which includes pensions.

Also they stated 'This calculation includes tax you owe HMRC for an earlier year. We have shown this in the Adjustments section of your tax calculation letter'. so is this a further £812 of unpaid tax or does the total include the £518 from the previous year?

Does the calculation below make sense?

Income 2024 - 2025

Job until retirement Aug 2024

£16,554.41

Income Tax:  £2,410.20

PENSION SCHEME 1

£2,903.68

Income Tax:  £335.40

PENSION SCHEME 2

£9,992.04

Income Tax:  £1,998.40

State Pension/State benefits

£8,501.50

Income Tax: £0.00

Total

£37,951.63

Income Tax: £4,744.00

Less your allowances

Personal Allowance (Tapered if appropriate)

£12,570.00

Total tax free amount

£12,570.00

Your total taxable income

£25,381.63

Income Tax rate(s)

Basic rate at 20% on

£25,381.00

Income tax: £5076.20

Total

£25,381.00

Income tax: £5,076.20

Adjustments

Plus other adjustments

£518.80

Plus total adjustments

£518.80

Result

Total tax payable

Income Tax: £5,595.00

Tax you have already paid

Income Tax: £4,744.00

You owe HMRC

Income Tax: £851.00

Thanks for your help all.