§ Mr. Nobleasked the Chancellor of the Exchequer what are the annual tax allowances granted for alimony payments in the case of a man earning £65,000 a year and making annual payments of, respectively, £25,000, £20,000 and £14,000 to previous wives, on the basis, of standard assumptions about his taxable capacity in other respects.
§ Mr. Robert SheldonThe payer of the alimony in the example given is entitled to deduct income tax at the basic rate and, providing he has paid tax on his gross earnings, can retain the tax so deducted. In this way he obtains relief at the basic rate. If he is liable to income tax at the higher rates, additional relief is subsequently granted.
On the basis of the figures quoted the tax payable in 1975–76 by a single man with no other tax allowances earning £65,000 a year would be £48,415, but after allowing for alimony payments totalling £59,000 the ultimate tax payable would be £1,921. However, alimony payments are treated as investment income in the hands of the recipients and are taxed at the basic, higher and investment income surcharge rates. Assuming that each of the ex-wives is a single person with no other income or tax allowances the total tax charged on the alimony received would be £40,836.