This will be the least romantic blog post you will ever read about getting married. We are not marriage counselors here at irishfinancial.ie, but it’s probably not a good idea to be making a decision on whether to get married or not based on monetary gain.
But many newlyweds may be eager to know how their personal finances will change after they get hitched.
In this blog post, we will show you a few scenarios that go through the tax situations both before and after for married couples (or people in a civil partnership), so you can clearly see in what situations there is a tax benefit from getting married.
In reality there are some situations where you will see a tax benefit and there are some situations where you will end up paying the same tax as when you were both single.
The biggest change you are likely to see is in how much PAYE you are paying. Lets first summarise the PAYE tax bands and credits which will be very relevant to understanding your tax situation.
PAYE Tax Basics
Below is a summary of the tax bands which will dictate how much PAYE you will be paying. There are two tax rates (20/40%) and in the following table you will see at what level of income you start paying the higher rate of tax.
| PERSONAL CIRCUMSTANCES | PAYE @ 20% | PAYE @ 40% |
|---|---|---|
| Single | On first €36,800 | On any amounts > €36,800 |
| Married 1 person working | On first €45,800 | On any amounts > €45,800 |
| Married 2 people working | Partner 1 up to €45,800 and Partner 2 €27,800 | On all amounts > €45,800/€27,800 respectively |
Each person is also entitled to a personal tax credit which will be offset against the total PAYE charge deducted from your payslip. When you are married your personal tax credits are combined and can be shared or transferred if there is scenario where one partner is not utilising theirs.
| PERSONAL CIRCUMSTANCES | TAX CREDITS |
|---|---|
| SINGLE | €1,700 |
| MARRIED | €3,400 ( which can be shared between partners) |
Let’s look at some examples
For this example we will talk about a couple called John and Mary.
Scenario 1
In the first scenario, both John and Mary are working, with Mary earning a significantly higher salary than John. Here is a breakdown of both their salaries:
| JOHN | MARY | |
|---|---|---|
| Gross Pay | €35,000 | €70,000 |
| Tax | €5,862 | €22,477 |
| Net | €29,138 | €47,523 |
| Effective Tax Rate | 17% | 32% |
In the next table we add both of their salaries together and then compare how much they would take home if they got married.
| SINGLE | married | |
|---|---|---|
| Gross Pay | €105,000 | €105,000 |
| Tax | €28,339 | €27,980 |
| Net | €76,661 | €77,020 |
| Effective Tax Rate | 27% | 27% |
As we can see in this particular scenario there was a very minimal tax benefit from John and Mary getting married. Their net take-home pay is just €359 more over the year.
Scenario 2
In scenario John decided to quit his job and Mary remains working and earns the same €70,000 per annum.
Lets compare the tax situation now for Mary if she was single versus married to John in this scenario.
| Mary (single) | mary (married) | |
|---|---|---|
| Gross Pay | €70,000 | €70,000 |
| Tax | €22,477 | €18,977 |
| Net Pay | €47,523 | €51,023 |
| Effective Tax Rate | 32% | 27% |
As John is not working and therefore not utilising any of his tax credits or lower tax band, Mary can transfer this to herself. This results in Mary paying €3,500 less in tax compared to when she was single.
Scenario 3
In the final scenario we will run the example for a situation where both John and Mary are earning less money. In this scenario they are both working and John earns €50k per annum and Mary earns €20k per annum.
Here is a breakdown of both their salaries:
| John | MARY | |
|---|---|---|
| Gross | €50,000 | €20,000 |
| Tax | €12,777 | €1,620 |
| Net | €37,223 | €18,380 |
| Effective Tax Rate | 26% | 8% |
In the next table we add both of their salaries together and then compare how much they would take home if they got married.
| Single | MARRIED | |
|---|---|---|
| Gross | €70,000 | €70,000 |
| Tax | €14,397 | €12,598 |
| Net | €55,603 | €57,402 |
| Effective Tax Rate | 21% | 18% |
The tax saving in this scenario is €1,799.
Summary of 3 scenarios
What we can summarise from these 3 scenarios is that the biggest tax benefits of being married will accrue to families where just one parent is working. Similarly, where you have families earning lower incomes there will also be some tax benefits, particularly when one partner earns more than the other.
If you are both high earners the tax benefits post marriage will be very minimal as we saw in scenario 1.
Does the method of assessment effect your taxes?
Another question you may have is whether you should choose to go with being jointly or separately assessed once you get married?
There are three options for calculating tax for you and your spouse or civil partner. These options are:
- joint assessment
- separate assessment
- separate treatment
You should not see any material difference between the tax you end up paying if you choose to either joint or separate assessment.
Joint Assessment
The most popular option that couples choose is to go with a joint assessment. Under joint assessment you are chargeable to tax on your combined total income.
Joint assessment allows you to allocate (transfer between you) most of your tax credits, reliefs and rate band with your spouse.
The Tax Rates, Bands, and Reliefs that apply to you depend on if one or both of you have an income. You cannot transfer:
- the Employee Tax Credit
- employment expenses
- the increased rate band.
If you and your partner both have taxable income, use myAccount to allocate your tax credits and rate band however you wish.
Separate Assessment
When you elect to be separately assessed, your taxes are treated like you have remained single throughout the year. Tax credits such as Married persons tax credit are split 50/50.
Then at the end of the year you can do a joint tax return or both do individual returns. If either spouse has unused credits or room left on their tax bands then these can be transferred between partners at this stage. If you have overpaid tax during the year then you will be able to claim back this as a refunds.
Separate Treatment
This option would be the least favoured method as you would be choosing to continue to be assessed as single people and lose the tax benefits of being married such as the ability to transfer unused tax credit, reliefs or bands to each other.
If you found this blog post interesting, then you might also be interested to know what the effective tax rates are for Irish people in 2022 for various income levels:
If you are interested in how being married effects the taxes you pay in your investments then we will cover this in a separate post as it deserves its own deep dive.
Disclaimer: This blog post is for informational and educational purposes only and should not be construed as financial advice.