HC Deb 15 June 1978 vol 951 cc636-7W
Mr. Ian Stewart

asked the Chancellor of the Exchequer what is the marginal rate of income tax and the marginal rate of employee's social security contribution for a married woman, earning £1,500 and £2,500 a year, whose husband is earning £4,000, £8,000, £12,000, £16,000 and £20,000 a year, assuming no dependent children or other allowances claimed.

Mr. Robert Sheldon

Since the general rule is that the income of a married woman is aggregated with her husband's but there are also reliefs specifically available against wife's earnings, the marginal rate of tax payable on the couple's joint income may differ according to whether it is assumed that the marginal pound is earned by the husband or the wife. The figures are as follows:

Marginal rate assuming marginal pound is attributable to
Husband's earnings £ Wife's earnings £ (a) husband's earnings per cent. (b) Husband's earnings Per cent.
4,000 1,500 34 25(1)
8,000 1,500 34 25(1)
12,000 1,500 55 46(1)
16,000 1,500 65 56(1)
20,000 1,500 75 66(1)
4,000 2,500 34 34
8,000 2,500 40 40
12,000 2,500 55(2) 34(2)
16,000 2,500 70(2) 34(2)
20,000 2,500 75(2) 34(2)

The marginal rate of employee's national insurance contributions for a married woman depends upon whether or not she pays at the reduced rate. If an election to pay at the reduced rate has been made, the marginal rate of each of the earnings levels specified by the hon. Member is 2 per cent.; if an election has not been made, the marginal rate is 61 per cent. if she is contracted in to the earnings-related pension scheme, or 4 per cent. otherwise.

Notes

(1) A separate wife's lower rate band of 25 per cent. is available against her first £750 earnings in excess of the wife's earned income allowance of £985. But this does not affect the couple's threshold for higher rate tax. The effect is that, where the wife's earnings are liable at 25 per cent. only, the marginal rate on the joint income is reduced by nine percentage points on an extra £1 earned by the wife, as compared with the marginal rate applicable to an extra £1 earned by the husband.

(2) At these earnings levels for husband and wife respectively, it is advantageous for a couple to make an election for separate taxation of wife's earnings. The husband and wife each get a single allowance—instead of the married allowance and wife's earned income allowance—and both are taxed separately on their own earnings as if they were two single people. The marginal rates given assume that such an election has been made.