Married taxation - some cases and queries

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Protocol

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Sorry, I know there is a lot of info on there, but I am still confused about the allocation of the SRCOP to a married couple. I will present a few cases and would be very grateful for any explanations.

1. Both spouses earning 20k

Does one get a SRCOP of 41k, and the other gets 23k?


2. Both spouses earning 30k.
Does one get a SRCOP of 41k and the second person 23k?
If so, is the unused 11k from the first person lost?? Or can it be transferred to the second earner?

Or can they get 32k SRCOP each?



3. What about a couple each earning 40k

Does one get 41k, and the other 23K, and so the 1k is lost??

Or can they get 32k SRCOP each?



4. What about a couple each earning 50k?
 
I spoke to the Revenue yesterday and (I think!) they told me that one spouse HAS TO take at least 23,000 no matter what, and the other takes the balance. In a Joint Assessment situation transfers cannot take place. In a Separate Assessment situation tranfers CAN take place. That's what I think they said anyway!! Does that help at all?
 
Andrewa said:
I spoke to the Revenue yesterday and (I think!) they told me that one spouse HAS TO take at least 23,000 no matter what
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Only if they opt for joint/aggregated assessment rather than individual assessment or assessment as two single people.
In a Joint Assessment situation transfers cannot take place.
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The "both spouses working increase" in the standard rate band is never transferrable. Some other credits/allowances are not transferrable (e.g. PAYE credit as far as I know). Other credits/allowances are transferrable.
 
This is my understanding of how the individualisation works

Provided you ask to be assessed as "Joint Assessed" or "Aggregated Assessment"
You need to contact Revenue stating the amount of the SRCOP allocated to each spouse.

The answer below are the limits within which SRCOP are allowed. You can allocate within these limits.

Remember salaries/wages increase during the year.

Protocol said:
1. Both spouses earning 20k

Does one get a SRCOP of 41k, and the other gets 23k?
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Ans: One spouse gets a SRCOP of 41K the other 23K

Protocol said:
2. Both spouses earning 30k.
Does one get a SRCOP of 41k and the second person 23k?
If so, is the unused 11k from the first person lost?? Or can it be transferred to the second earner?

Or can they get 32k SRCOP each?
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Ans: Both can opt for 32K SRCOP
Protocol said:
3. What about a couple each earning 40k

Does one get 41k, and the other 23K, and so the 1k is lost??

Or can they get 32k SRCOP each?
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Ans: One spouse can take 40K and the other 24K

Protocol said:
4. What about a couple each earning 50k?
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Ans: Each spouse can take 32K each or 41K and 23K respectively.

It ends up the same at the end of the year. You should ask for a balancing statement in Jan each year. You may have to complete some forms sent in P60s etc and calculations shown. Any underpayment / overpayment will then be made.
 
thanks!

Just had a really confusing conversation with someone in revenue about this, i have no idea how to get myself and husband assessed.

Does anyone know:

If I earn 41k and hubbie 34k.

If i take the 38,400 allowance and only pay 42% on the remainder - 2,550

Does he pay 42% on his whole salary as i have taken his allowance?

Help appreciated
 
First of all the main earner can take the SRCOP up to its max of 62,000 or each of you could take 31K
If i take the 38,400 allowance
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It is not an allowance but the amount which you can earn at the lower rate of tax i.e. 20%
I am assuming this is what you meant

You can allocate the SRCOP wharever way you wish up to this limit of 62,000
I have worked the following figures using the figures above
Salary 41K
SRCOP 38.4
so 38.4 is taxed at 20% = 7,680
with the remainder 2.6 K taxed at 42% = 1,092
giving a total gross tax of 8,772
you then deduct your credits for this figure to give the Net tax

Your husbands figures are then calculated as follows
Salary 34K
SRCOP 23.6K
so 23.6K taxed at 20% = 4,720
balance 10.4K taxed at 42% = 4,368
Total gross tax of 9,088
Total gross tax bill for both for the year is 17,860

At the end of the year revenue will issue a balancing statement as follows
Salary 75K
SRCOP 62K
so 62K taxed at 20% = 12,400
and the remainder 13K taxed @ 42% 5460
giving a total tax of 17,860

Hope this makes sense. If not let me know and I'll try to explain. (Hope my calculations are correct)
 
ok thanks that makes a bit more sense!

So we are better off being jointly assessed then

Why cant they just tell you which way you would be better off!! then i wouldnt be sitting her with calculators trying to work it out...
 
Lyndan said:
ok thanks that makes a bit more sense!

So we are better off being jointly assessed then

Why cant they just tell you which way you would be better off!! then i wouldnt be sitting her with calculators trying to work it out...
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Most married couples will be better or at least no worse off on joint/aggregated assessment. This is stated in the Revenue FAQ/booklet. Couples on individual assessment should be taxed the same although they may have to reclaim any overpayment of taxes at the end of the tax year. Couples on assessment as two single people may end up worse off and pay more tax. I have never really understood why any couple would opt for this treatment or possibly even the second one above. Maybe somebody could explain when these would be suitable?
 
My understanding is that if both couples are earning over the SRCOP then it does not matter what option they take and can even request to be taxed as individuals. One benefit of opting for the married option is where one income drops below the SRCOP the non use of the SRCOP can be transfered to the other earner.
I have never really understood why any couple would opt for this treatment or possibly even the second one above.
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My explanation in the previous post is based on a married couple taxed jointly. There is no second one?

Or perhaps I haven't made myself clear which some have accused me of (not on AAM I might add) .
 
There are three married taxation options:
  1. [broken link removed]t (with nominated spouse)
  2. [broken link removed]
  3. [broken link removed] (as if they were not married at all)
asdfg said:
My understanding is that if both couples are earning over the SRCOP then it does not matter what option they take and can even request to be taxed as individuals.
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The first two usually or always have the same results with the exception that under option (2) the couple may need to balance their tax affairs for overpayment tax at the year end. Couples can (and will?) end up worse off under option (3). This is why I don't understand why a couple would ever choose it other than to assert their independence on tax matters from each other or something...? :confused:
One benefit of opting for the married option is where one income drops below the SRCOP the non use of the SRCOP can be transfered to the other earner.
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There is no one "married" option. There are three married options as outlined above.
My explanation in the previous post is based on a married couple taxed jointly. There is no second one?
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There is indeed a second and a third option as above.
 
Couples can (and will?) end up worse off under option (3). This is why I don't understand why a couple would ever choose it other than to assert their independence on tax matters from each other or something...?
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An example may explain
Both spouses working and earning 40K & 45K respectively
SRCOP 32 K each
Tax as follows
Assessment as individuals
Salary 40K
32K @ 20% = 6,400
8K @ 42% = 3,360
Gross tax = 9,760

Salary 45K
32K @ 20% = 6,400
13K @ 42% = 5,460
Gross tax = 11,860
Total Gross tax 21,620

Assessment as joint with one partner taking increased tax band to 41K
Salary 45K
41K taxed @ 20% 8,200
4 taxed @ 42% 1,680
Gross tax 9,880
Salary 40K
23K @ 20% 4,600
17K @ 42% 7,140
Gross tax 10,740
Total gross tax 21,620

As I said previously if both spouse are earning over the SRCOP then as far as i can see it doesn't matter which way they sort out their tax affairs

If one earns less than the SRCOP then it will make a difference.

In individual situation credits and unused SRCOP can't be transfered

I also prev said
My explanation in the previous post is based on a married couple taxed jointly
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There was no second option in that particular post.

I realise that I did not explain the other options but I thought that it would be easier to explain matters in this particular circumstance without going into to much detail.
 
Apologies if I was dragging this off topic by adding all three married taxation options into the mix. I was not necessarily having a go at your explanations. Just that the married options other than joint/aggregated are still confusing to me in terms of when/why anybody would choose them.
 
my understanding is that if both spouse are earning over the SRCOP for an individual currently 32K then it does not matter what way they choose to order their tax affairs.

If however one spouse is earning less than 32K in a tax year then it is better to opt for joint assessment as the other spouse can increase the amount taxed on his/her income at the lower rate.
It is all sorted out at the end of the year anyway.
 
Surely that is not the case. For example even if each spouse is earning over the individual SRCOP opting for [broken link removed] will leave them worse off than joint/aggregated or individual married taxation (my underlining)?
15. What is Assessment as a Single Person?

Assessment as a Single Person, (also referred to as Separate Treatment) should not be confused with Separate Assessment. Under Assessment as a Single Person each spouse is treated as a single person for tax purposes.
Both spouses:
  • Are taxed on their own income
  • Get tax credits and the standard rate cut-off point due to a single person
  • Pay their own tax
  • Complete their own Return of Income form and claim their own tax credits.
One spouse cannot claim relief for payments made by the other and there is no right to transfer tax credits or standard rate cut-off point to each other.
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While I understand (I think) the information provided by revenue, I think, when you work out/see a few examples you will see where I am coming from.
Maybe I'm missing something but this is how we learn.

A few examples

Assessed as single persons
Salary 1st spouse 42K
SRCOP 32 @ 20% 6.4K
Bal 10 @ 42% 4.2
Total Gross Tax 10.6K

Salary 2nd spouse 42K
SRCOP 32 @ 20% 6.4K
Bal 10 @ 42% 4.2
Total Gross Tax 10.6K
Total Gross tax for the couple 21.2K

Assessed jointly - Elect to leave SRCOP at 32K each
Salary 1st Spouse 42K
SRCOP 32 @ 20% 6.4K
Bal 10 @ 42% 4.2
Total Gross Tax 10.6K

Salary 2nd spouse 42K
SRCOP 32 @ 20% 6.4K
Bal 10 @ 42% 4.2
Total Gross Tax 10.6K
Total Gross tax for the couple 21.2K

Assessed Jointly - Elect that one spouse takes the max SRCOP or 41K
Salary 1st Spouse 42K
SRCOP 41 @ 20% 8.2K
Bal 1 @ 42% 0.42K
Total Gross Tax 8.62K

Salary 2nd spouse 42K
SRCOP 23 @ 20% 4.6K
Bal 10 @ 42% 7.98
Total Gross Tax 12.58K
Total Gross tax for the couple 21.2K

In all three examples above one for individual assessment and the other two for joint assessment, where both spouse earn over the SRCOP the gross tax payable is the same.
 
Do those calculations deal only with the rate bands/SRCOPs and not necessarily additional credits some of which will be transferreable under joint/aggregated and separate assessment but not necessarily under taxation as two single people? Note that the [broken link removed] illustrate how a couple could be worse off on assessment as two single people versus the other two options and they also say:
This basis of assessment [assessment as two single people] can be unfavourable in some circumstances because any unused tax credits or standard rate cut-off point cannot be transferred. Home Carer's Tax Credit cannot be claimed in respect of a spouse who cares for a dependent person and who may otherwise qualify for the relief.
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I still can't understand why any married couple would opt for this unless they wanted to keep their tax affairs separate (or secret!) from each other for some reason?
 
I don't think the issue of additional credits comes into it as both taxpayers will be paying a significant amount of tax. The increase in tax credit would have to be fairly large to wipe out the gross tax (see examples in prev post). Most married couples would have tax credits of less than 7,000 (with one spouse having to take at least 1,490 leaving the assessable spouse taking the balance) so once their gross tax bill is greater than 7,000 it does not matter which option for assessment of tax they take. There are no tax credits to transfer.


The revenue worked examples are based on an example of one earner over the SRCOP and one less than the SRCOP. Of course this will be unfavourable if individually assessed.

I still can't understand why any married couple would opt for this unless they wanted to keep their tax affairs separate (or secret!) from each other for some reason?
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I agree everything in a marriage should be above board with nothing hidden. I am looking at the figures purely from the point of view of financial planning. The option is available to do individual assessment, my argument is that if both are earning over the SRCOP then it does not matter which option they choose.
 
asdfg said:
The revenue worked examples are based on an example of one earner over the SRCOP and one less than the SRCOP. Of course this will be unfavourable if individually assessed.
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Fair enough. I need to study/think about this a bit more.
I agree everything in a marriage should be above board with nothing hidden.
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That was not my point. I don't care what way different couples handle their financial affairs. I just wondered why a couple would opt for assessment as single people. One possibility that I can think of is to do so in the year before SSIA maturity where the loss of any married tax "benefits" would be outweighed by the gain attributable to one or both spouses availing of the SSIA to PRSA transfer incentive. I want to crunch the numbers on this for our own situation (me working, wife not) and see if it might be worth doing so that my wife could avail of the offer and the benefits would outweight the costs.
I am looking at the figures purely from the point of view of financial planning.
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Me too. Just wondering if/when assessment as single people is useful/beneficial.
 
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