Self-assessment tax filers looking to use their spouse’s allowance report surprise bills, but HMRC tells them to file their return anyway
- The marriage allowance allows a transfer of up to £1,250 to your spouse
- This is done to reduce the tax you pay due to a higher personal allowance
- One reader told This is Money the system had automatically calculated the allowance every year since 2016, but this year told him he had a £238 extra bill
Those filling out their tax returns ahead of the January self-assessment deadline this Friday and are looking to take advantage of their partner’s unused allowance have reported surprise tax bills, but the taxman has told them to file their return anyway.
One reader, who wanted to remain anonymous, has taken advantage of his wife’s annual marriage allowance since 2016, but this year was told when filling out a self-assessment form that he owed a surprise £238.
He told This is Money that the right level of tax had been rightly applied every year since then and an extra allowance from his wife successfully transferred, but this year this hadn’t been the case.
One reader told This is Money someone at HMRC had said a number of people had reported issues with the marriage allowance
He said: ‘While completing the online self-assessment I was asked if I had agreed a transfer of my allowance to my wife, but not if my wife had agreed a transfer to me.
‘Once the assessment data has been input the system computes my tax liability. It has recognised my personal allowance, but not the agreed extra tax free allowance.
‘It has therefore incorrectly calculated a higher tax charge that they insist is paid by 31 January.
‘This was not an issue in prior years.’
He claims an HMRC staff member told him on the phone that others had been contacting the taxman about the problem, suggesting it could be causing problems.
The marriage allowance allows someone to transfer up to £1,250 of their Personal Allowance to their husband, wife or civil partner to reduce how much they have to pay in tax, if they earn more than the person making the transfer.
Once the transfer has been made the person in receipt of the allowance will see their tax code change to ‘M’.
Someone who has transferred their personal allowance and is in employment will see their tax code change to ‘N’.
Our reader told us their tax coding for the previous 2018-19 tax year had confirmed his wife had transferred part of her allowance to him, but when he tried completing his self-assessment return last week nowhere was he asked to confirm this arrangement and he was told he needed to pay an additional tax charge of £238.
According to a freedom of information request by insurer Royal London, around 460,000 people were overcharged on income tax in the 2018-19 tax year.
When This is Money contacted HMRC about our reader’s issue, it said the taxman would cross-check with his wife once he had completed his own self-assessment that she had confirmed the transfer, and retrospectively apply relief.
However, it is unclear why this hadn’t been the case in previous years, with our reader not previously experiencing problems.
An HMRC spokesperson said: ‘The tax reduction that a recipient of Marriage Allowance receives is not taken into account until the self-assessment tax return is processed.
‘When a return is processed by HMRC, the tax reduction will take effect in the calculation.’