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Marriage Tax treatment in the Isle of Man
For the tax year during which you got married, you will be assessed individually. You will then have the option to elect for joint taxation in the next tax year. This will mean that you will both be jointly and severally liable for all your joint tax affairs. In the absence of any election, you will continue to be assessed individually.
You have the choice to be either jointly or independently taxed. In the absence of any election, you will be assessed independently. In most instances it is preferable to be taxed jointly as allowances and rate bands are freely transferable. These can easily be wasted if you are independently assessed. Any unused allowances, deductions or 10% band of tax may not be transferred to the other partner. The restriction on the transfer of unused amounts could result in an increased combined liability.
Jointly assessed, you will receive the married couples allowance, which is equal to twice the single persons allowance and in addition deductions and 10% band of tax will be automatically off-set against the joint income of both persons when being assessed. If employed, during the year, it is possible to offset unused allowances etc. from one spouse to another by adjusting each person's tax codes preventing too much tax from being deducted.
A claim needs to be made no later than 31 December during the first year of assessment that you wish the election for joint taxation to apply for.
Should you wish to choose independent assessment If you are newly married or a new resident, you do not need to do anything as the default position is independent taxation. If you are currently jointly assessed, either you or your spouse must revoke your claim. Both persons each receive the single persons allowance (time apportioned for new residents). Both partners also receive the full benefit of the 10% band of tax. Relief for any allowable deductions is given to the person who made the payment. Joint payments are allocated on an equal basis unless shown that the allocation should be different.
If you were previously jointly taxed up to the date that you separated, you will each need to complete separate income tax return forms, making claims for deductions and paying your own tax.
The treatment for the income tax year in which you separate is as follows:-
If you were jointly assessed
With effect from the year of assessment in which the permanent separation has taken place, both spouses are treated as single persons.
For later tax years:-
The husband is treated as a single person and assessed only on his income.
The wife continues to be treated as a single person, and assessed only on her income.
If you are independently assessed
As both partners are treated as single individuals throughout, only one assessment is required on each partner and only one single allowance is granted to each partner in the year of separation.
Relief for deductions ie mortgage interest
Tax relief is granted to the person or persons paying the interest and owning the property. However, following separation, you may be able to claim relief even if you do not own the home that you shared before the separation. To make a claim you must be able to show that you have paid the interest. If husband and wife each pay part of the interest, the relief is divided between them.
Maintenance payments ( From 6 April 2012 Maintenance payments are not taxable and relief if is no longer available)
Tax on maintenance payments ( Not taxable from 6 April 2012)