An Actual Tax question...

LoLth

having recently conned a member of the opposite sex into marrying me I've been looking at the tax situation.

we were married in september 2008 so as far as I can tell, we should continue being taxed as we are for the first year and then we choose what way we'd like the tax credits to be calculated.

details (approximates)

my wages: 38k (gross)
spouse: 50k (sickening)

We have the usual plethora of expenses but nothing out of the ordinary.

From using the online tax calculator, I cant see any difference at all in the combined take home Nett pay when I calculate us being taxed as individuals and us being taxed as a married couple.

so, what , if any are the benefits of being taxed as a married couple ? (in english... as few syllables in each word as possible please)

I know we can pool our tax credits and divide them up whichever way works best for us but I think we are both exceeding out cut off point so either way, we will both be taxed at the higher rate (or is that 40k and above?)

anyway, any plain english examples with numerical examples would be appreciated.

ps. welcome to mod-dom (oooh a palindrome!)

indigopopz

What year did you get married?

If it was this year you will be taxed as singles in the year of marriage but may claim relief if you're both better off under a joint assessment.

There are 3 bases of assessment for married a couple..joint,seperate and single.

If you go under joint assessment(more than likely you will)you're basic tax Credits will double....ie...Personal,PAYE(if applicable) etc.
You're standard rate tax band also increases from single rate(E35400 for'08) to E44400('08)...ie you would be taxed @20% on amounts up to the limit.Excess @41%.

That's a basic/brief snyopsis...hope it helps!

delly

No, there's no benefit whatsoever i'm afraid. Whatever way you distribute your tax credits, you'll still end up with the same amount of total takehome pay.

indigopopz

delly wrote: »

No, there's no benefit whatsoever i'm afraid. Whatever way you distribute your tax credits, you'll still end up with the same amount of total takehome pay.

That's just not true.

delly

Well from what I understand, as both persons are earning at the higher rate, the same amount of money is taxed at the higher rate, whether it be split or weighted onto the one person. The tax credits also remain the same, so where's the benefit?

Quality

LoLth wrote: »

having recently conned a member of the opposite sex into marrying me I've been looking at the tax situation.

we were married in september 2008 so as far as I can tell, we should continue being taxed as we are for the first year and then we choose what way we'd like the tax credits to be calculated.

details (approximates)

my wages: 38k (gross)
spouse: 50k (sickening)

We have the usual plethora of expenses but nothing out of the ordinary.

From using the online tax calculator, I cant see any difference at all in the combined take home Nett pay when I calculate us being taxed as individuals and us being taxed as a married couple.

so, what , if any are the benefits of being taxed as a married couple ? (in english... as few syllables in each word as possible please)

I know we can pool our tax credits and divide them up whichever way works best for us but I think we are both exceeding out cut off point so either way, we will both be taxed at the higher rate (or is that 40k and above?)

anyway, any plain english examples with numerical examples would be appreciated.

ps. welcome to mod-dom (oooh a palindrome!)

Ok If the tax you paid in 2008 as two single persons is greater than if you were jointly assessed then you can claim a refund

Differences can arise if one of you do not use all of your Standard rate cut off point.

For example with seperate assessment you can only use a standard rate cut off of 35,400 each.

In joint assessment, One person can use up to €44,000 and the other up to €26400.

So it is more beneficial if one person is well paid and the second is a lower earner.

The_Hustler

I was of the understanding that joint and seperate assessment should always result in the same assessment overall since some unused bands and credits can be transferred between spouses. The difference is disclosure of information between spouses.

Single assessment doesn't allow such a transfer so will usually result in a different assessment.

I often read that joint assessment is the most beneficial but then that tax assessed will be the same under joint and seperate assessment. I hope someone can clarify this for me.


The OP wanted figures, so here's a basic example using 2009 figures

Joint Assessment

Wife's Income 50,000 + His Income 38,000 = 88,000

Standard Rate Band
Wife 45,400 x 20% = 9,080
4,600 x 41% = 1,886
Tony 27,400 x 20% = 5,480
10,600 x 41% = 4,346
Total 20,792

Tax Credits
Married Tax Credit 3,660
PAYE Tax Credit x 2 3,660
Total 7,320

Tax Payable 20,792 - 7,320 = 13,472

Separate Assessment

Wife
Income 50,000

Standard Rate band 36,400 x 20% = 7,280
13,600 x 41% = 5,576
Total 12,856

Tax Credits
Personal Tax Credit 1,830
PAYE Tax Credit 1,830
Total 3,660

12,856 - 3,660 = 9,196

Him
Income 38,000

Standard Rate band 36,400 x 20% = 7,280
1,600 x 41% = 656
Total 7,936


Tax Credits
Personal Tax Credit 1,830
PAYE Tax Credit 1,830
Total 3,660

7,936 - 3,660 = 4,276

Total Tax Payable (9,196 + 4,276) = 13,472

The third assessment method, Single assessment (also know as seperate treatment so it can get confusing) would actually be the same here as the second example meaning all three would give the same tax assessment as they are both on 41% but if say he was on lower income and didn't use all of the €36,400 band in the second example, the transferable portion of this unused band would have been tranferred to the wife, making the tax assessed lower and matching the tax assessed in joint assessment. This does not happen in single assessment hence would not usually be an advisable option.


OP there is some very good info on this on the Revenue site

http://www.revenue.ie/en/tax/it/leaflets/it2.html

http://www.revenue.ie/en/personal/circumstances/marriage.html

There are revenue examples in the first link and these are quite clear and relevant. Others above please note that the examples given show joint and seperate assessment giving the same tax assessed even when on different rates of tax.


OP, as you said it says you will be taxed as single persons for the year of marriage but if the tax you pay as two single persons in that year is greater than the tax which would be payable if you had been taxed as a married couple, a refund of the difference can be claimed. That is not the case given your income levels above, but just in case it was different last year. The bands are a bit lower for 2008 as mentioned in posts above.


Sorry if I'm way off base here given what indigopopz is saying to delly, and also delly said it was because they are on both on the higher rate but is it not also the case on different rates? I normally deal with corporation tax, but am I missing something glaringly obvious?


And sorry OP, just noticed you wanted it explained very basically!
It's been said but marriage allows one partner to take advantage of some unused amounts by the other partner if they are on too low an income to use it all themselves.

curleys

Another instance.
If 1 spouse is working and the other is on Disability income, what way should these be taxed and what SCROP and tax credits are eligible?

swanvill

Hi,
As The Hustler explained with income tax once both persons are earning in enough to be taxed at the higher rate their is no benefit on an income tax side.

However there are benefits on capital gains tax/ stamp duty / inheritance (CAT) tax in that all inter-spousal transfers (not as dirty or exciting as you think ) are exempt from CGT/CAT tax. If you are recently married and own your own home prior to marriage then the two of you can claim principal private residence relief (PPR) (sell without any CGT liability)

Also there are benefits under dependent relatives allowances and obtaining a second/third PPR

Swanvill