Some of you may have taken the opportunity to use the marriage allowance to obtain a tax saving of £212 in the 2015/16 tax year by claiming to transfer any surplus tax free personal allowance from one spouse to the other if you are both no more than basic rate taxpayers.
We understand that a number of clients are now receiving assessments from HM Revenue and Customs (“HMRC”) removing this relief, but we believe that in many cases this is being done incorrectly.
To date, we have encountered three reasons given by HMRC for denial of the relief:
- The claim has not been processed as it was made on the tax return rather than through the online claim form. Although claims can be made in this way and were processed earlier in the year, many are now being missed; we therefore suggest that new claims are made via the online form, which we can help you with. We are reviewing the claims made by our clients in the year to ensure that these are processed. In the meantime, if you think this has affected you for 2015/16, we can contact HMRC on your behalf to reinstate the relief.
- The claim has been rejected where the higher earning spouse’s total income exceeds the basic rate band, but they are still a basic rate taxpayer as a result of reliefs set against income, for example loss relief or qualifying interest decisions. The relief is still due in these cases so please get in touch if this has affected you.
- In some cases, the marriage allowance transfer is only being processed where the transferring spouse’s income is 90% or less of the personal allowance (£9,990 in 2016/17). This is not correct as 10% of the allowance can be transferred even if the transferring spouse pays tax.
Remember, you can claim to transfer the Marriage Allowance to obtain a tax saving of up to £220 in 2016/17 if the following apply:
- You’re married or in a civil partnership
- Either you or your partner don’t earn anything or you are both only basic rate taxpayers
- You do not receive the Married Couple’s Allowance
If you were eligible for Marriage Allowance in 2015/16 but didn’t make a claim, it’s not too late! You can backdate your claim to 6 April 2015 and get a repayment of tax of up to £212. If you think any of the above issues apply to you, or would like further information,