Just 28% of spouses gain from Tory marriage tax break

Just 28 per cent of couples in marriages or civil partnerships will benefit from the Tory proposals to 'reward' marriage in the tax system, according to analysis by the Institute for Fiscal Studies (IFS).

Just 28 per cent of couples in marriages or civil partnerships will benefit from the Tory proposals to ‘reward’ marriage in the tax system, according to analysis by the Institute for Fiscal Studies (IFS).

David Cameron announced on Friday that, from April 2015, up to £1,000 of the income tax personal allowance will be transferable between adults who are married or in a civil partnership at a cost of around £700 million a year to the exchequer.

“This is not about stigmatising unmarried people or single parents,” Cameron wrote in the Daily Mail.

“All we’re saying is that marriage is a good thing for our country – it’s the ultimate form of commitment under the law – and we want to show our support for it.”

The policy will work by allowing an individual not using all of their £10,230 income tax personal allowance – because their income is less than the allowance, for example – to transfer up to £1,000 of the unused allowance to their partner. This transferred allowance would lower the spouse’s tax bill by up to £200 a year.

The transferred allowance would not be available to higher rate or additional rate taxpayers.

However, according to the IFS just 28 per cent of couples in a marriage or civil partnership will benefit from the policy. The proposal may also result in married couples that contain a basic-rate taxpayer facing a weaker incentive to having the second person in work, as two earner couples will not benefit.

The policy may also, interestingly, punish the chancellor’s much praised ‘strivers’. As the IFS puts it:

“Since the transferred personal allowance would not be available to higher rate taxpayers, workers benefiting from a transferred allowance would have a weaker incentive to increase their taxable income above £42,450.”

 

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