Are you recently married? Or perhaps you got married a few years ago but haven’t informed the Revenue about the change of your marital status? You may be missing out on some tax savings and may also be due a tax refund.

In 2019 single persons standard rate cut off point is €35,300. Married couple with one income is entitled to €44,300 to be taxed at 20%, while married couple with two incomes is entitled to an additional amount of up to €26,300 before their income is charged a 40% tax rate. In order for you to understand if you can benefit from being assessed as a married couple, you need to look at your individual situation and the level of each spouses income.

Once you are married you may choose to be assessed for tax jointly which is usually the most favourable basis of assessment for a married couple or civil partners. Under joint assessment you are chargeable to tax on your combined total income. The tax credits and standard rate cut-off point can be allocated between spouses to suit their own circumstances. If only one spouse/civil partner has taxable income, all tax credits and the standard rate cut-off point will be given to the spouse/civil partner with income (cut off point of €44,300 and tax credits of €4,950 plus you may also be entitled to a home carers credit of €1500 if one partner stays at home to care for a child or other dependent person). If both of you have taxable income, you can decide which one of you is to be the assessable spouse/nominated civil partner. You then ask the tax office to allocate the tax credits and standard rate cut-off point between you in whatever way you wish. Please note that you can not transfer an Employee Tax Credit, employment expenses and the increase in standard rate cut-off point of up to €26,300. Which means that the spouse with lower income has to keep their employee tax credit and the increase in the rate band which is capped at the lower of the amount they earn or €26,300. It’s best explained by demonstrating an example.

Example: Alex and Joanne are married with Alex being the higher earner in the family. They decide to be jointly assessed for tax with Alex being an assessable person (he pays tax on behalf of both spouses) . Their tax liability will be calculated like this:

Alex’s annual pay is €50,000

Joanne’s annual pay is €25,000

Total: €75,000

€69,300 (standart rate cut off point €44,300 plus €25,000 which is Joanne’s pay) is taxed at 20% = €13,860

The remaining €5,700 is taxed at 40% = €2,280

Total Tax €16,140

Less credits €6,600

Total tax liability €9,540

If Alex and Joanne were assessed as single persons, their tax liability would be as follows:

Alex pay €50,000 Joanne’s pay €25,000

€35,300 taxed at 20% = €7,060 €25,000 taxed at 20% = €5000

€14,700 taxed at 40% = €5,880

Total tax €12,940 Total tax €5000

Less credits €3300 Less credits €3300

Alex’s tax liability €9,640 Joanne’s tax liability €1,700

Total combined tax liability is €11,340. So as you can see Alex and Joanne will save €1,800 by choosing to be jointly assessed.

Another option is to elect to be separately assessed.
Under separate assessment, each spouse or civil partner is assessed on his or her own income with tax credits and reliefs divided between them, but they can transfer any unused rate band or credits between each other. When combined, their tax liability will be the same as if they were jointly assessed.

There are special rules when you are newly married and want to start being assessed as a married couple.
In the year of marriage or registration, both individuals will be taxed as single individuals for that year of assessment. However, additional relief for the year of marriage or registration may be available on review, if the aggregate of the tax payable by the couple as single individuals for the year of assessment exceeds the tax that would have been payable if the couple had been jointly assessed to tax throughout the year. There is a special formula that’s used in order to calculate a tax relief due and both of you may be due a tax refund the following year once you apply to be assessed as a married couple. It has to be done by the 31st of March of the year you want the joint assessement to apply.

A number of other generous tax concessions are made to married couples, including:

• Assets may be transferred between spouses and civil partners without being subject to capital gains tax.
• Any capital losses made by one spouse may be used by the other spouse to reduce a capital gains tax bill.
• Any gifts or inheritances given by one spouse to another are completely free of capital acquisition tax.
• Any money received by yourself or your spouse from a life assurance policy (providing you or your spouse were the original beneficial owners) will be completely tax-free.
• Married couples do not have to pay stamp duty when they transfer assets from one to another.

If you need help in making sure that you and your spouse or civil partner have the most beneficial tax treatment set up, Peak Finance Solutions offers fast and hassle free service. You can get in touch with us by clicking here.