Marginal tax at 40% for joint assessed wife on less than 44k

[Iamyourfriend]

Hi!

As a suave confirmed bachelor I don't understand joint assessment, but I was surprised to learn a retired married woman was paying so much tax on her pension investment earnings. She's paying the tax at 40%.

This is the wife's pension..which is less than the 44k cut off for marginal tax

this is the husband's employment which is over 44K, but because he contributes to a pension the taxable pay is only 38.5K

So why is the wife paying tax at 40% in this scenario? Would they be better off by being separately assessed?

 

[ClubMan]

Would they be better off by being separately assessed?

Almost certainly not.

This is the wife's pension..which is less than the 44k cut off for marginal tax

Tax rates, bands and reliefs

This page shows the tables that show the various tax band and rates together with tax reliefs for the current year and previous four years

www.revenue.ie

Married or in a civil partnership (both spouses or civil partners with income)

€53,000 @ 20% (with an increase of 35,000 max), balance @ 40%

How are their credits allocated?
Which is the assessable spouse?

Joint assessment

This page outlines joint assessment

www.revenue.ie

 

[Daphne]

Looks like the husband has almost all of her tax credits allocated to him. They need to look at their certificate of tax free allowances for the year and see how the credits are split.

If they do a tax return at the end of the year and not all credits have been utilised they should be due some tax back.

They should also consider reallocating the credits so that she gets more of them.