Taxation And Marriage

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Upon marriage, there are some changes to your tax status that you should be aware of. The main benefit for married couples was the married couples’ allowance. However, from 6th April 2000, this was abolished for married couples below the age of 65 years and will be replaced by the children’s tax credit from 6th April 2001.

Income tax

Married couples are treated as two separate individuals for income tax purposes. Therefore, you will each continue to be taxed on your own income, claim your own tax allowances, pay your own tax and receive any repayments of any tax overpaid. Even if you have the same tax office, your tax affairs will be handled separately and in strict confidence.

Upon marriage, you will each continue to receive your annual personal allowance of £4,385. Income tax is applied at the following rates above your personal allowance:

Earnings in excess
of personal allowance
tax rate
Up to £1,520 10 per cent
£1,521 to £28,400 22 per cent
Over £28,400 40 per cent

For example, if you earn £24,000 per annum (£2,000 per month), you will pay:

  • No tax on the first £4,385
  • 10 per cent tax (£152) on the next £1,520
  • 22 per cent tax (£3,981) on the balance

The total amount of income tax payable in the above example is £4,133 per annum (£344 per month). National Insurance contributions for employed persons are payable at the rate of 10 per cent on monthly earnings between £329 and £2,319. Therefore, on a monthly salary of £2,000, National Insurance of £167 will be deducted.

Children’s tax credit

Available from 6th April 2001, children’s tax credit provides income tax relief (i.e. paid via your tax code) for married couples or single parents with children under the age of 16 years. Children’s tax credit reduces the amount of income tax you pay by up to £442 a year where the annual gross income of the highest earning member of the household is less than £39,785. However, the amount of tax credit falls by £1 for every £15 of income over £32,785.

Note: Children’s tax credit does not affect or replace child benefit allowances.

Capital gains tax

The only change to capital gains tax for married couples living together is that transfers of assets will not be taxed immediately. Any gain or loss will be deferred until the asset is disposed of by the husband or wife who receives it.

Although you each continue to have your own annual exempt amount (£7,200 for 2000/01), you cannot set your losses against your husband’s or wife’s gains.

Inheritance tax

In general, anything you give your husband or wife during your lifetime or leave in your will is free from inheritance tax.

Joint incomes

Income from sources that are held in both your names, such as interest from bank or building society accounts, dividends from shares and rent from property and so on, will be treated as if you own it in equal shares. Each of you is taxed on half of the income unless you tell your tax office otherwise. You will only have to pay tax on your half if you are liable to tax.

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