‘Back Marriage In Tax System’, Says Think-Tank

News

A report supported by a cross party group of MPs has called on the Government to recognise marriage in the tax system.

The report, ‘The Policies of Belonging’, from the think-tank Onwards, was released last week. Funded by the Joseph Rowntree Foundation, Shelter and Power to Change, it calls for ministers to “hand power and capital back to communities after the pandemic to repair Britain’s fraying social fabric”.

Its recommendations include introducing a “family tax allowance” which would “allow partners to transfer their £12,500 tax allowance to their working spouse”. This would replace the current marriage tax allowance, introduced in 2015, and extend it from the current £1,250 to the full £12,500 tax-free amount – a ten-fold increase.

The purpose of the allowance is to recognise families and not just individuals in the tax system by allowing either partner to commit to children or family care without foregoing their tax allowance, or to balance part-time work or other commitments without a penalty.

Currently, when one partner gives up some or all work to care for family, the family loses some or all of the benefit of their tax-free allowance. This means, for example, that a family where each parent works 20 hours per week pays far less in tax than a family where one parent works 40 hours and the other has no paid employment, even though both couples undertake 40 hours of paid work. Creating a financial incentive in this way for both parents to work when that may not be what they would otherwise choose or what is best for the family is not right and the report is right to call for it to change.

The cooperation in family life that marriage embodies is of great benefit to society and to the next generation. The importance of that cooperation should be rewarded, not penalised, by the tax system. We hope the Government, rightly eager to revitalise community life after the pandemic, will give this proposal serious consideration.