Does the credit split make any difference?

naughtysmurf

Married couple both working, at the end of the day (or year) does it really make any difference to your after tax income as a couple how you split your credits/ allowances between you?

For the sake of argument, ignoring any potential bonus etc

Income 1 = 60K

Income 2 = 40K

relax carry on

naughtysmurf wrote: »

Married couple both working, at the end of the day (or year) does it really make any difference to your after tax income as a couple how you split your credits/ allowances between you?

For the sake of argument, ignoring any potential bonus etc

Income 1 = 60K

Income 2 = 40K

Not on those figures. But still opt to be Joint assessed to allow for unforseen changes like reduced hours etc. For now split credits and rate band 50/50.

barneystinson

naughtysmurf wrote: »

Married couple both working, at the end of the day (or year) does it really make any difference to your after tax income as a couple how you split your credits/ allowances between you?

For the sake of argument, ignoring any potential bonus etc

Income 1 = 60K

Income 2 = 40K

Well if Spouse 1 has the minimum standard rate cut off for a married person, of 23,400, they will pay tax at 41% on 36,600.

Spouse 2 would thus have the remaining standard rate cut off of 41,400. They would pay no tax at the high rate, but 1,400 of the cut-off would be unused.

So the couple (via Spouse 1) would pay tax at the high rate on 1,400 more during the year than they would if the SRCOP was split 50:50 (or just about any other way than I described!).

The effect of this would be only €294 (1,400 x [41%-20%]) in additional tax / reduced take home pay.

But if spouse 1 earned 60k and spouse 2 earned 30k the effect would be €2,394.

This is merely a cash flow issue though, as the tax will be refunded if / when you get a balancing statement post year-end.

If both spouses are earning more than 41,400 then it makes no difference, otherwise, it can make a difference.

naughtysmurf

barneystinson wrote: »

Well if Spouse 1 has the minimum standard rate cut off for a married person, of 23,800, they will pay tax at 41% on 36,200.

Spouse 2 would thus have the remaining standard rate cut off of 41,800. They would pay no tax at the high rate, but 1,800 of the cut-off would be unused.

So the couple (via Spouse 1) would pay tax at the high rate on 1,800 more during the year than they would if the SRCOP was split 50:50 (or just about any other way than I described!).

The effect of this would be only €378 (1,800 x [41%-20%]) in additional tax / reduced take home pay.

But if spouse 1 earned 60k and spouse 2 earned 30k the effect would be €2,478.

This is merely a cash flow issue though, as the tax will be refunded if / when you get a balancing statement post year-end.

If both spouses are earning more than 41,800, then it makes no difference, otherwise, it can make a difference.

Thanks for that, how does any tax get refunded? Is it in the form of a cheque or added credits etc for the following year?

barneystinson

naughtysmurf wrote: »

Thanks for that, how does any tax get refunded? Is it in the form of a cheque or added credits etc for the following year?

You have to request a balancing statement, PAYE anytime online service is the easiest way to do this, and you can claim for other credits/allowances like medical expenses etc...

Refunds issue by cheque, or direct into your account if you enter your bank details.