Married - spouse self employed

[Zora]

Can you help a confused newly wed? Having notified the Revenue of our marriage this year I have received an IT2 Booklet and been asked to complete an "Assessable Spouse Election Form". I cannot work out whether it is more beneficial for us to be jointly or separately assessed. From the booklet I see that we can be jointly assessed where one spouse is self employed and "can let your circumstances dictate whether most of the tax should be paid under PAYE or in a lump sum on assessment. This will be determined by the manner in which the tax credits are allocated". I don't understand this - can anyone explain it in a practical sense? Thanks

 

[Graham_07]

Your joint tax credits can be allocated to either party as you chose. If you allocate them to the PAYE earner, then that party will pay less tax. The self-employed party will pay tax on their self-assessed earnings but will not have any tax credits so their bill, which is issued annually, will be higher. It is really down to whether you want a lesser PAYE deduction and higher self-assessed amount or vice versa.

Bear in mind that the same will apply to the standard rate cut-off point as to who would be best getting the higher cut off point.

Ultimately, the estimated earnings from PAYE and self-employment will dictate your allocation. If your self-employed spouse has an accountant it might be a good idea to run all of this by them before making a decision.

 

[Zora]

Thank you. The PAYE income is €60,000 and the self employed €30,000. If we elect for separate assessment is it a case of having to wait until 31 October of say 2008 in order to determine the unused Standard Rate Cut-Off point and unused tax credits for 2007?

 

[Graham_07]

2007 is the Year of Marriage so a tax return & review of that year will be necessary anyway, after the end of 2007, but before the self-employed deadline of 31/10/08. If you file on ROS< the 2007 return could possibly be filed as early as end January 2008, assuming all 2007 data is available, including your spouses self-employed accounts.

The YoM review basically runs along the lines that if the tax paid by you individually in the post-marriage period, exceeds the tax payable by you in that period as a married couple, then the excess is refunded in proprotion to the tax paid by each of you.