Jim Ferguson

A Conservative Government will introduce a recognition of marriage and civil partnerships in the tax system.

“This is sending a signal that we understanding the value of commitment”, said David Willetts.

“Britain is unique in the raw deal one earner couples get”, he added. Most European countries recognise marriage in the tax system.

The proposed recognition will take the form of a partially transferable personal allowance for all married couples and civil partnerships.

• One member of an eligible couple will be able to transfer £750 of their tax free personal allowance to their partner in order to reduce their partner’s income tax bill. This will be limited to basic rate taxpayers and is therefore worth up to £150 a year per couple at the 20% rate of tax. In 1999, its final year before it was abolished for all but pensioner couples, the Married Couples Allowance was worth £197 per couple per year.
• The additional transferable allowance will be tapered away at incomes above £42,500 so that no higher rate taxpayer earning £44,000 or more will benefit.
• Eligible couples where one partner is not using all of their tax free personal allowance and the other earns between £6,600 and £44,000 will be up to £150 a year better off.
• The full benefit of £150 goes to eligible couples where the main earner earns between £7,300 and £42,500.

The independent Institute for Fiscal Studies estimate that this will cost about £550 million. This will be paid for using some of the revenues from a levy on banks that will raise more than £1 billion. The remaining revenues will be used to reduce the deficit.

This is a progressive tax measure, with two thirds of the benefits going to families in the lower half of the income distribution. The biggest gains as a percentage of income go to households in the third decile of the income distribution. 4 million out of a total 12.3 million married couples will benefit.