Husband and Wife Taxation (Hansard, 14 July 1981)

§ Mr. Peter Rees

[pursuant to his reply, 9 July 1981]: The estimates of the effect of the switch to independent taxation under schemes 1 to 4 of appendix 6 of the Green Paper apply to the liability to tax on the total income of a married couple taken jointly, and cannot easily be subdivided between husband and wife. The estimates given in the answer to the hon. Member for Oldham, West (Mr. Meacher) were therefore based, as explained in the answer, only on the income currently separately attributed for tax purposes, which is confined to wife's earnings in the case of the wife. The attribution between husband and wife of the effect on the couple's total income thus excludes the effect of switching from the husband to the wife the liability to tax on any investment income of the wife and—in the case of the elderly—on any national insurance retirement pension received by the wife on account of her husband's contribution. On this basis, for couples where the wife was not earning, all the couple's income would continue to be attributable to the husband. Thus, apart from scheme 4, where the 2.9 million non-earning wives with children would gain from the increase in child benefit, there would be no effect on non-earning wives.

As regards the husband, on this basis, under schemes 1 and 4—non-transferable allowances—all 4.7 million taxpaying husbands with non-earning wives would lose; under schemes 2 and 3—fully and partially transferable allowances—they would all gain. These figures—like those in the previous answer—exclude elderly taxpayers over 65.

Information on the net effect on the total income of the married couple, taking account of the switch of any wife's investment income or pension to her tax bill, is contained in the second background paper for the Green Paper, "Distributional Effects of a Change to Mandatory Independent Taxation", copies of which are available in the House of Commons Library.