Married allowance

proteuspal

Hello all. I just want to get a bit of info on the married allowance.
Am I correct in saying that:
1) two people, if registered can earn up to €70,600 between them and remain within the 20% tax limit? The main earner can earn a maximum of €44,300 and the second can earn a maximum of €26,300, within the 20% tax bracket ?

2) let’s say one person earns over these amounts, is the balance simply taxed at 40% for that person, ie anything over €26,300 for the second earner is taxed at 40%?

I have searched online and found the info a bit vague, so want to clarify.

Many thanks for your time

Stratvs

Yes you have it right. The thing with individualisation is married couples can earn up to the joint cut off but there is an individual cut off also. The 70600 can be split between spouses as required but no spouse can get more than 44300.

So if both earn 35000 then they could split the cut off between them equally and they’d have 35300 each and both would pay only 20% before tax credits.

On the other hand where one spouse earns over 44300 and other earns under 26300 (say 18000) then the most they can get at 20% between them is the 44300 + 18000.

proteuspal

Thanks so much for your reply. That’s really helpful and I understand it fully now.

Can I also ask - when it comes to calculating the persons income, does it cover all of employed income, self employed income, foreign rental income?

As an example, with nice easy figures, let’s say partner 1 the main earner earns exactly €44,300. Partner 2 earns €10,000 employed income PAYE, €10,000 self employed income, and €10,000 from foreign rental income. In this example, for partner 2, the employed income would be handled PAYE style , but the self employed and foreign rental income would be dealt with via self assessment ? And again the first €26,300 would be taxed at 20%, leaving the balance €3,700 being taxed at 40%?

Thanks so much for your time - I really appreciate it.

Stratvs

proteuspal wrote: »

Thanks so much for your reply. That’s really helpful and I understand it fully now.

Can I also ask - when it comes to calculating the persons income, does it cover all of employed income, self employed income, foreign rental income?

As an example, with nice easy figures, let’s say partner 1 the main earner earns exactly €44,300. Partner 2 earns €10,000 employed income PAYE, €10,000 self employed income, and €10,000 from foreign rental income. In this example, for partner 2, the employed income would be handled PAYE style , but the self employed and foreign rental income would be dealt with via self assessment ? And again the first €26,300 would be taxed at 20%, leaving the balance €3,700 being taxed at 40%?

Thanks so much for your time - I really appreciate it.

Yes it does.

Assuming partner 1 has had €44,300 of the joint cut-off allocated to their PAYE then they will pay 20% on that before tax credits.

If partner 2 has €10,000 in PAYE income then once they have the remaining €26,300 cut-off allocated to them then they pay 20% on that before tax credits. Then when partner 2 is taxed on self-assessment on the self-employed and foreign rents the remaining €16,300 of their cut-off is available there leaving the top slice of €3,700 exposed at 40%.

Obviously there will be PRSI and USC issues also on the non-PAYE income but as regards the application of the standard rate cut-off point for tax you're correct in your example.