BLOG: Marriage tax – tokenism at best
This is of course the marriage ‘tax break’, something which has been an inexplicably popular talking point among the Conservative Party for years now.
The idea seems to be that, by allowing spouses who do not work full time to transfer the unused portion of their tax-free allowance to their partner and thereby reduce the couple’s overall tax liability, cohabiting couples will be encouraged to tie the knot. A ‘tax-free allowance’ is, of course, the amount a person can earn before having to pay tax.
The trouble with this theory is that the financial rewards are, to say the least, modest – a maximum tax saving of £200 per year amounts to just £3.85 per week: not even enough to buy a single edition of most magazines, and barely enough for a cup of coffee in Starbucks. Are people really going to pledge their troth for such a pittance?
Nevertheless, the issue rumbled on and on, until the Prime Minister eventually announced that the tax break would indeed see the light of day in order to ward off a planned Tory rebellion.
As far as I am concerned, this is tokenism at best. It would have been far better to tackle the ongoing and far more urgent lack of cohabitation legislation in the country. Want to offer people a real incentive to get married? Then even up the playing field so that there are real consequences when a cohabiting relationship breaks down. If you did that, people would be much more likely to think carefully about their situation and not just drift into extended cohabitation without any thought.
I am of course not talking about making cohabitation the legal equivalent of marriage. I mean simply throwing the financial advantages to marriage – for example, preferential taxation rates on inheritance – into sharper relief.
Marilyn Stowe is senior partner at Stowe Family Law