is it worth switching my tax benefits now we're married?

P

positivenote

Registered User
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hi guys,
im earning approx 47k working in 2rd level education on a full time perm contract and my wife is earning approx 10.40 p/hr working as a full time Montessori teacher. What are the options for us regarding tax benefits now that we are married? i've heard of an option to switch her tax credits to mine? how would this benefit us? or would it?
thanks
 
Re: is it worth switching my tax benifits now we're married?

As your wife is probably not fully utilising her standard rate band, you should be able to benefit from being jointly assessed. If you got married this year, you can't be jointly assessed until next year, however at the end of the tax year if you both submit your P60s and advise the Revenue of your date of marriage, they will give you a tax refund which is worked out on a time apportioned basis for 2009 and for 2010 you can get them to give you enough of the standard rate band to cover your full salary.
 
Re: is it worth switching my tax benifits now we're married?

thanks for the reply and excuse the ignorance, but im a bit lost here...
is it a case of my wife being allowed to transfer any tax credits she is not using to me and this then increases my tax credit? thus she will keep receiving the same tax credits she was getting and in turn i would receive an increased allowance at the lower tax bracket?
 
Re: is it worth switching my tax benifits now we're married?

Ok, you (and your wife) have two things to consider in determining your tax liabilities.

The first is your tax credits. These are set amounts that are deducted from your final tax bill (provided you've enough tax to cover them). Everyone gets an individual tax credit of €1,830 and, if you are in PAYE employment, an employee tax credit of €1,830. The personal tax credit is transferrable and the PAYE credit is not. So, your wife could transfer €1,830 of her tax credits to you but this would increase her annual tax by that amount (and decrease yours by the same amount) so there'd be no net benefit.

The second thing to consider is your standard rate band. This is the amount of income you can earn before you hit the higher rate of tax (41%). An individual has a standard rate cut off point of €36,400. However, a married couple can transfer their standard rate band (to the point that one spouse has a standard rate band of up to €45,400). So, your wife could transfer €9,000 of her lower rate band to you, thus reducing your tax bill by €1,890 and, provided her income was less than €27,900, this wouldn't increase her tax bill.
 
Re: is it worth switching my tax benifits now we're married?

sorry for jumping on this post but I was wondering, myself and my husband are recently married, we both earn in the higher tax bracket, are we not really entitled to any tax benefit because of this?
 
Re: is it worth switching my tax benifits now we're married?

Probably not. Nige has summarised the situation quite well above. Basically, if you are both earning more than €36,400 per annum there would clearly be no benefit in any transfer of standard rate band between spouses. Similarly, on salaries at that level you'll both be paying more than €3,660 in tax per annum so there would be no benefit in transferring personal credits between spouses. Fiddling with your bands and credits when you're married makes most sense when one spouse is not using their band and credits (which is why most company owners stick their spouse on the company's payroll on a salary designed to hoover up all available bands and credits efficiently).
 
Re: is it worth switching my tax benifits now we're married?

Thanks guys for the useful info. If you switch your status to 'jointly assessed', can the payments be backdated to the start of the year?
 
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