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Married tax allowances to return?

David Cameron’s speech to Conservative Conference on 5 October suggested we are to see marriage and tax linked once more. What might this mean, and how will it affect gay couples?

In the Prime Minister’s speech he said the following:

“Marriage is not just a piece of paper. It pulls couples together through the ebb and flow of life. It gives children stability. And it says powerful things about what we should value. So yes, we will recognise marriage in the tax system.”

So what did he mean by that statement about recognising marriage in the tax system. I wish I hadn’t heard exactly the same phrase in his speech to the conference a year ago. I am not aware of any action flowing from last year’s promise. I can only assume that whatever measure was being considered did not make it to the Budget in March 2011. Hopefully we will see it in March 2012.

At the moment the only recognition for all but the oldest married couples is in the form of special Capital Gains Tax treatment and relief for Inheritance Tax on assets passed to one’s spouse. Readers should note that since December 2005 those same tax treatments also apply to same-sex couples so long as they are in a civil partnership.

One might wonder whether whatever Cameron has in mind will apply only to husband-wife marriages. His next statements to the conference seemed to have cleared up that uncertainty:

“Conservatives believe in the ties that bind us; that society is stronger when we make vows to each other and support each other. So I don't support gay marriage despite being a Conservative. I support gay marriage because I'm a Conservative.”

So the Prime Minister made quite clear that where couples of the same sex have made legally-recognised commitments to each other, then the government wants to recognise those, and that will include via the tax system.

But we are still left to speculate on what change the government has in mind.

Many people will remember that married couples used to get an extra tax allowance. In other words they would pay less tax than a couple who merely lived together. The allowance in its later years was called, simply, the Married Couples Allowance. Gordon Brown scrapped it in 1999 while he was Chancellor.

The only people who still get this abolished allowance are those where one party to the marriage was born before April 1935. So only folk in their nineties stand a chance.

So as I said, the tax system currently gives special treatment to married couples, and those in civil partnerships, by way of Inheritance Tax and Capital Gains Tax treatments. Only when the government makes a further announcement will we know if a form of Married Couples Allowance is to make a come-back.

If so they may have to come up with a politically-correct term for it which will also cover same-sex relationships. Maybe the Legal Couples Allowance?

Adrian Huston, a former tax inspector, is a director of Belfast tax and accountancy firm Huston & Co – www.huston.co.uk or 028 9080 6080.