I am regularly asked as to whether married couples or couples in a civil partnership should be taxed together jointly. This is impossible to answer without knowing information about each individual’s circumstances and what they earn but I can give you some basic guidelines.
After marriage or civil partnership, a taxpayer has the option to be taxed in one of three ways;
- Both parties are assessed as a single person – each party is taxed exactly as they were before with no transferring of tax credits or bands and is responsible for their own tax affairs
- Separate assessment – each party is treated as independent of the other throughout the year but certain tax credits and the rate bands can be transferred between partners at the end of the tax year. The transferable credits are the married person’s tax credit, age tax credit, incapacitated child tax credit and blind tax credit.
- Joint assessment – tax credits and rate bands can be allocated between parties in whatever way best suits their circumstances. Joint assessment is automatically applied by Revenue when you notify them of your marriage or civil partnership. It means the couple is charged tax on their combined income. The assessable spouse is the one responsible for filing a tax return and the highest earner will be the default assessable spouse if there is no selection made.
If both parties are paying tax at the highest rate (i.e earning over €35,300 for 2020) then there are no benefits to be gained from being jointly assessed.
The benefits come where one party;
- Earns less than €35,300 per year
- Has taken a period of unpaid leave
- Is unemployed
- Is a stay at home parent taking care of children (in this scenario the Home Carer’s Tax Credit may be claimed also)
In these scenarios, the majority of the tax credits and tax bands can be transferred between partners to allow a reduction in tax paid by the family unit overall. The employee tax credit and the standard rate tax band increase of €26,300 (in 2020) is not transferable between partners.
The Revenue guidance on this topic can be found here.