We thought we were saving £966 a year with a well-known tax perk – but a simple mistake left us £500 worse off
A COUPLE thought they were saving £966 only to discover that a simple mistake left them £500 worse off.
Ever since their wedding day on January 10, 1987, Derek and Eileen Mascall have shared everything.
But something the couple from Oxfordshire never considered sharing was their personal tax-free allowance.
It wasn't until August 2021, Derek spotted something about the marriage tax allowance online.
You can get a tax rebate for missed marriage tax allowance claims online via HMRC directly for free.
However, tax firms can do it only on your behalf, but these come with high fees.
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Derek told Rip off Britain: "I've been seeing this advert on Facebook and thought it was a quick way of finding out whether or not I was entitled to any rebate."
Marriage allowance is available to 2.1 million couples who are married or in a civil partnership, where one person earns less than the personal allowance threshold of £12,570.
You can transfer £1,260 of your personal allowance to your partner, reducing their tax by up to £252.
In addition to this year's allowance, you can also get it for the previous four tax years - currently 2019/20, 2020/21, 2021/22 and 2023/24.
During those years, the tax break was worth £250, £250, £252, and £252, respectively, meaning you can get up to £1,256 in total.
But Derek filled in the online form only to be told he wasn't eligible after all.
Little did he know he'd started a chain of events that would end up costing them.
A few weeks later, Eileen got a letter from HMRC.
She told Rip off Britain: "I read that I was due for a tax rebate, and I thought, great - I can have a good holiday on this."
However, on closer reading, they noticed that the £966 rebate was going to be sent to a tax advisory company they'd never heard of.
Eileen added: "I just thought, why on earth have they sent money to another company."
But before she could find out who this company was, four more letters arrived from HMRC.
But in this instance, they were addressed to Derek.
Three of the letters said Derek owed the tax office money a total of almost £1,000.
The fourth letter then confirmed that some of Derek's personal tax allowance had been transferred to Eileen following his application for marriage tax allowance.
However, Derek doesn't remember ever applying for the tax perk.
He said: "All I wanted to do was find out whether I was eligible because it was a free check.
"So I phoned up HMRC and just said, a company has acted on your behalf."
However, it turns out that during the process of checking their eligibility online, the couple had accepted terms and conditions, which meant that a tax advisory firm could act as their representative.
The company had then changed Derek's tax code and backdated it, prompting HMRC to recalculate the tax he'd paid in the last few years.
It meant that he actually owed £947 to HMRC.
A week later, the tax administrator contacted the couple and confirmed that it had received the £966 rebate.
However, at the same time it had pocketed more than half of it in fees.
It meant the whole saga left the couple over £500 worse off.
Cut out the middle-man
BEWARE of tax firms taking a slice of your HMRC refund.
The marriage allowance — which lets a spouse transfer 10% of their tax-free personal allowance to their higher-earning partner — is a wonderful support to cash-strapped couples.
But not if greedy tax rebate firms nab more than 80% of their yearly allowance of up to £252, which can be backdated four years to up to £1,242.
Worryingly, some ask customers to sign legally binding contracts called a "deed of assignment" giving the tax refund firm permission to make a rebate claim on their behalf — and this could stay in place for future claims, regardless of whether the collector does further work for them.
How can I check for a tax refund?
If you have paid the wrong amount of tax, HMRC will either send you a tax calculation letter called a P800 or a Simple Assessment letter.
But only if you are employed or receive a pension.
Anyone registered for self-assessment will have their tax bill adjusted automatically.
If you have not received any of these but still think you might have paid too much tax, try HMRC's simple tool.
It should tell you if you are due a refund in around 15 minutes.
Find out more by visiting www.gov.uk/claim-tax-refund.
It may be from paid work, job expenses, a pension or other income or your self-assessment bill.
It then walks you through a handful of questions to determine your circumstances.
For UK residents not eligible for self-assessment, R40 is the form required to submit a claim on overpaid tax on savings and investments, including PPI.
The marriage allowance form, which lets eligible people transfer £1,260 - or 10% - of their Personal Allowance to a spouse or civil partner, is even simpler and should not require a third-party agent.
Both forms are available online, which is a quicker option than paper forms and posts.
In most cases, you can only reclaim tax for the past four years.
You can also use the free HMRC app. This is a quicker and paper-free way to process your refund, which will be paid straight into your bank account.
Log in using your Government Gateway user ID and account password.
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Access the relevant section, such as pay as you earn (PAYE). Click on "Summary of Income Tax" – either for the current, or previous, tax years.
If you are eligible for a tax rebate, you’ll see a green button that says "Claim your refund". Click this and follow the instructions.