Several months ago I wrote a blog about the Marriage Allowance transfer ability – where one person can transfer £1060 of their personal allowance to their spouse. You were able to sign up for it via the HMRC website which made it a permanent election until revoked. As accountants, we heard nothing more after that.
It is now time to start submitting you 2015/2016 tax return. The election to transfer the £1060 can be made at this time if you are one of the “lucky” millions of people that need to complete a return.
If you are the lower earning spouse – so your income is not in excess of £10,600 – there is a box in the tax return which asks if you would like to do the transfer. You do need to know your spouse’s income to make sure they are still a 20% tax payer.
This initial pop up box is not linked to the question on the first page about if you are married!
Later on in the return, you get to the marriage allowance page as shown
This bit will probably need to be completed together so you have the right information, and if you forget the wedding date – whoops!
Once that is done and your return is filed, it takes a few working days to go through the HMRC system but eventually the allowance transfer will show on the higher earning spouse.
The higher earning spouse then completes their return, but the acknowledged problem is that the return system does not show that the transfer has taken place, and will still only show their allowance as the £10,600 for the 2015/2016 tax year. Therefore the calculation of tax liability will be £212 greater than it should be.
Having phoned HMRC about this point, they informed us that the return would be adjusted and the payment page changed to reflect the correct amount of tax to be repaid.
Now the problem comes if the £1060 was transferred to a spouse that was due a refund for overpaid tax. It appears that the £212 was not included in the refund for a client of mine, so I guess a phone call to HMRC will be in order to find out what is supposed to happen!
Anyway, the upshot is, the lower earning spouse needs to do their tax return first, wait a few working days, and then the higher earning spouse does their return. I suggest people in this situation don’t wait until January but file a lot earlier so if and adjustment is missing, it can be corrected before the tax is due to be paid.
By the way – if you are a couple that fit the earnings criteria but don’t have to complete a tax return, then contact the HMRC helpline to do the transfer for 2015/2016, or for 2016/2017, then the link is here >>>>> https://www.gov.uk/apply-marriage-allowance
The information contained in this document is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is provided or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.