HMRC have recently attempted to remove a marriage allowance transfer for a couple, where the transferor had less than the 10% personal allowance unused. This treatment is incorrect as outlined below:
Background to the transfer
The marriage allowance transfer was introduced from 5 April 2015 onwards and allows a person to transfer 10% of their personal allowance to their husband, wife or civil partner. This is available when both parties are married or in a civil partnership and are basic rate tax payers before and after the transfer.
For the claim to be beneficial one party’s income should fall within their 0% tax bands and personal allowance, for 2019/20 this is £12,500. If income is below this level, a flat amount of 10% (£1,250 of the personal allowance) can be transferred leaving the transferor with a new allowance of £11,250.
The issue for transferor with less than 10% of their personal allowance available
Where the transferor has less than 10% of their personal allowance unused before the transfer, they are still able to make the claim; however, any amount above the new personal allowance after transfer will become taxable at the basic rate.
We have found in some cases, however, that HMRC have been removing the marriage allowance transfer if there is not the full 10% personal allowance available. This is the incorrect treatment and should this happen to you; please be sure to question this with HMRC.
Please note: If you qualify for the marriage allowance transfer, you may be able to make a backdated claim from 5 April 2015 onwards (the date the transfer became available).
To check if you are eligible to claim and to find out the potential tax savings for your household, there is a HMRC Marriage Allowance calculator that may be of use: https://www.tax.service.gov.uk/marriage-allowance-application/benefit-calculator/
If you have any questions on the matters outlined above or think this may affect you, please contact us and one of our team will be happy to help: https://www.whitingsllp.co.uk/about-us/contact-us/