The three options for assessment of married couples and civil partners are
- single treatment; assessment under which each is assessed as a single person;
- joint assessment; where they are assessed jointly generally in the name of one on behalf of both, and
- separate assessment where spouses are assessed separately, but unused tax credits and standard rate allowance are transferable and may be claimed by the other.
Under single assessment, spouses are assessed as if they were not married. Either spouse must give notice to the Inspector of taxes to choose single assessment before the end of the tax year. Single assessment is usually less beneficial because the lower rate band and credits are not transferred between the spouses, if they are unused.
Under single assessment each is treated as a single person. Both must file a tax return and receives single persons tax credit and single persons standard rate band. The other spouse’s/civil partner’s allowances or bands are not available. The home carer credit is not available. Losses, credits, unused allowances and unused bands and deductions cannot be transferred.
Joint assessment is the default presumption. A husband and wife may elect jointly for joint assessment, where they are not jointly assessed. It applies for the current year and subsequent years.
A married couple (including same-sex couples) or civil partners, who live together, have an option to be taxed jointly, which is potentially more favourable, than single or separate assessment. A joint assessment is presumed by Revenue, until another option is chosen.
Where joint assessment applies, the spouse who is assessed is liable for the whole income tax. They receives a joint combined tax credit and file a single return in respect of the joint income.
Jointly Assessed Party
Where a couple is assessed jointly, either party may be assessed. Formerly, the assessment was made on the husband exclusively.
The normal presumption is that the spouse with the greater total income is assessable. Where the wife’s income is greater the wife may be assessed by the inspector of taxes. The spouses can choose otherwise.
The election as to which spouse is to be assessed must be made by April 1st in the relevant year. This spouse who is assessable, has responsibility for tax liability on the full income and is assessable. He or she is entitled to the combined credits and should file a joint tax return.Where there is a repayment it is paid in proportion unless the inspector determines another method to be fairer.
Where the jointly assessed spouse has not paid the tax within 28 days of the due date. Revenue can recover the tax from the other spouse. The amount may be the lesser of the tax payable on the amount that would been assessed under separate assessment.
Where a couple, whether married persons or civil partners are assessed jointly, either party may submit an online tax return on behalf of the couple for previous years of assessment. Where one of the parties is a chargeable person and required to make a return then the provision does not apply and his or her obligation remains.
Separate assessment is similar in its financial effect ,but the spouses are assessed separately. Notice must be given to obtain separate treatment, as the legislation deems married persons to have elected for joint assessment, unless notice is given before the end of the tax year in writing to the inspector.
A claim for separate assessment must be made at least six months preceding April 1st in the relevant year. It can be made by either spouse.
Under separate assessment, spouses are treated entirely separately for tax purposes. The potential tax savings of joint assessment is available. However , separate returns of income are made by the spouses. The personal credits and reliefs available are the same. The total tax payable cannot be greater than the amount which would have been paid on joint assessment.
The couple must choose separate assessment, by not later than 1st April in the year. Most tax credits such as personal tax credits are divided equally. Other tax credits are given to the spouse who bears the cost in respect of which the credit is given. The unused credits of one spouses are available against the other spouse’s liability. The unused standard rate band can also be transferred.]
Year of Marriage
Married couples are tax singularly, if they marry during the year. However, they receive a relief proportionate to the number of whole months, that they are marred, in the year of marriage. A proportionate amount of the relief is available of 1/12 of the additional tax payable under single assessment, in respect of each month of marriage.
Credits & Bands (Single Assessment)
Under assessment as a single person, also known as separate treatment, each spouse or civil partner is treated as a single person for tax reasons. With this option:
- Both spouses or civil partners are taxed on their own income
- Both spouses or civil partners get tax credits and the same standard rate cut-off point due to a single person
- Both spouses or civil partners pay their own tax
- Both spouses or civil partners complete their own return of income form and claim their own tax credits. One spouse or civil partner cannot claim relief for payments made by the other. There is no right to transfer tax credits or standard rate cut-off point to each other.
Credits & Bands (Joint / Separate)
Formerly, spouses who were jointly assessable, were entitled to double allowances (equivalent of credits) and double standard rate bands. Individualisation has restricted the favourable treatment of married couples in cases where one spouse only works or where both work and one earns less than a certain income.
Jointly assessed married persons are entitled to double tax credit, home carers tax credit, double mortgage interest relief and increased standard rate band.
Jointly assessed spouses are entitled to a married tax credit which is twice the single tax credit. The assessed spouse is charge to income as if it was his or her own. The income is calculated however as if it was the income of the spouse to whom it belongs.
Deductions in the calculation of assessable profits may be available to the other spouse if there is insufficient income to be absorbed by the spouse’s income to which this relates. This includes excess capital allowances.
Irish rental losses and foreign trading investment and rental losses are not available to the other spouse.
Non- Resident Spouse
If one spouse only is resident in Ireland then the strict position is that that spouse is entitled only to the single persons tax credit and standard rate bands. Joint assessment with a non-resident spouse or civil partner is not provided for under the legislation.
By way of concession, Revenue permit a non-resident spouse who has no other income to be the subject of joint assessment. In this case the residents spouse obtains the married person’s tax credit and the increased standard rate bands.
Where the non-resident spouse has income, the proportionate relief may be claimed. This is based on the proportion of the tax liability based on notional joint assessment that the Irish income bears to the worldwide income.
The home carers tax credit was introduced as a result of the adverse reaction to the changed to individualisation. spouse may claim home care tax credit if he or she cares for one or more dependent.
Where one spouse is employed and has income and the other is a home carer, the home carer tax credit of €1600 (2021) may be available. The spouse concerned must have income of less than €7200 and a dependent person must be cared for. The increased standard rate cut-off point is an alternative to the home carer’s credit.
Depending on circumstances, it may be more beneficial to claim the home carer’s tax credit. The home carer’s tax credit is available only, where the couple have children or other dependents who are being cared for.
Where the carer spouse has income more than €5,080 in the year, the home carer tax credit is reduced by half of the amount of the excess.
Bands and Credits
The standard rate band for married couples/civil partners is €45,800 in 2022. This is taxed at 20% and the balance is taxed at 40%. Where both spouses/civil partners have income, this standard rate cut-off point can be increased by the lower of the following:
- €27,800 in 2022 or
- The amount of the income of the spouse/civil partner with the smaller income.
Where one spouse only his an income, the standard rate band is €45,800. Where both have income, the standard rate band is €44,300 plus the income of the lower earning spouse, up to a maximum of €26,300. Therefore, the maximum possible standard rate band is €70,600, (i.e. double the single band). However, this is only available where both spouses are working and each earn at least €26,300.
The increase in the standard band is an alternative to the home carers tax credit. The increase in the standard rate cut-off point interacts with the Home Carer’s Tax Credit. If the increased standard rate cut-off point is more beneficial than the Home Carer’s Tax Credit, it can be claimed instead. Revenue grant that which appears more beneficial.