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Married tax breaks, for better or worse by John Bolch

The issue of tax breaks for married couples (and those in civil partnerships) is back in the news. It is topical, too – only last week it was reported that figures from the 2011 census showed that married couples have now become a minority in the UK.

To re-cap, in September David Cameron announced that he would make good on his election promise to recognise marriage in the tax system. He said that from 2015 certain couples would benefit from a £1,000 transferable tax allowance. The allowance would apply to couples who are both basic rate tax payers, where one spouse is earning less than the personal allowance, which will be just over £10,000 in 2015. The prime minister claimed that this would include some four million couples, or about one-third of all couples who are either married or in a civil partnership.

The way the tax break will work is that any personal allowance not used by one spouse will be transferred to the other spouse, up to the sum of £1000, thereby reducing the other spouse’s tax bill. As the basic rate of income tax is 20%, the tax break will mean that these couples will pay up to £200 a year less income tax, making them £3.85 a week better off.

That figure, however, has now been put into question by research from the Resolution Foundation, a think-tank devoted to improving the living standards of people in Britain on low and middle incomes. They claim that two out of every five of those couples who will pay £3.85 a week less tax from 2015 will see £2.50 of it ‘clawed back’ when the new universal credit scheme takes effect two years later, leaving them only £1.35 a week better off. The reason for this ‘claw back’ is that, unlike the present tax credit system, universal credit assesses entitlement on the basis of income after tax. Accordingly, if your taxes are cut, you are considered better off and thus get less support.

Meanwhile, former Conservative Chancellor Lord Lawson has entered the argument over married tax breaks by saying that they should be introduced earlier, to make it more difficult for any Labour Government coming to power in 2015 to reverse the policy. He also argues that they should be more generous, presumably to give unmarried couples even more incentive to tie the knot.

And there lies one of the problems with the Government’s married tax breaks policy, at least in its present form. It is an attempt at social engineering, and a pretty feeble one at that. How many people are going to be persuaded to get married for the sake of £3.85 (or less) a week?

But the arguments against the policy do not stop there. Why should one form of family arrangement be favoured above any other? The Government will say that marriage produces better outcomes for children, but there is no evidence that this is due to marriage itself. The Institute for Fiscal Studies has argued that those better outcomes are more likely to be due to the fact that better educated and higher-earning couples are more likely to get married.

The policy is also unfair. As the campaign group Don’t judge My Family point out, it discriminates against various groups in society, including the one in four children growing up in a single parent family, widows and widowers, people who leave abusive relationships and those who simply choose not to be married.

In short, the idea of married tax breaks seems to me to be another attempt to return to a ‘golden age’ when almost all couples were bound by marriage, the glue that held society together. The problem is that that golden age never existed, and even if it did it is too late to turn back the clocks.

John Bolch often wonders how he ever became a family lawyer. He no longer practises, but has instead earned a reputation as one of the UK's best-known family law bloggers.

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  1. Stitchedup says:

    “The Institute for Fiscal Studies has argued that those better outcomes are more likely to be due to the fact that better educated and higher-earning couples are more likely to get married.”

    I haven’t done the research, but I would argue that better outcomes for children are more likely to be attributed to a stable family background, i.e. parents that stay together and are able to work at a relationship, married or not.

  2. Luke says:

    Yes, Stitchedup, what you are saying makes sense, it is the attitude of the parents that really counts – married or not.

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