Stop raising personal allowances and start rewarding marriage

Jul 6, 2018 by

by Nola Leach, The Conservative Woman:

At present in the UK we have a tax system that discriminates against families. CARE’s most recent research showed that at the average OECD wage (£36,571) the tax burden on one-earner married couples with two children is 20 per cent higher than the OECD average. This is an extraordinary figure. The unfavourable position of single-earner families is mainly due to the fact that our income tax system does not take any real account of marriage or family responsibilities.

To understand how we got into this mess, we need to go back in time. Income tax was formally introduced in 1842. Back then, for the purposes of tax, the income of a married woman was treated as that of her husband’s. When the Conservatives came into power in 1979, it was felt that change was needed. The times had moved on and besides, the way a married woman’s income was treated raised privacy concerns.

First, Geoffrey Howe acted to deal with the staggeringly high rates of income tax (the top rate was then 83 per cent). He also abolished the investment income surcharge. After Howe came Nigel Lawson and he set himself the task of dealing with the deeper rooted structural problems in the tax system.

Clearly the issue of a married woman’s income and the lack of privacy connected to that was a priority. But Lawson also wanted to address the fact that a married couple who were both in paid work, or if only the wife was, received around 2.6 times the single person’s allowance while a married couple where only the husband was in paid work got 1.6 times that allowance. So, a married woman’s investment income was unfair, and marriage was penalised in the tax system.

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