Wednesday, October 06, 2010

Married couples 'to get tax break by 2015'

The government plans to introduce a tax break for married couples before the 2015 election, the BBC understands.

The news comes after criticism of the chancellor's plan to axe child benefit for higher rate taxpayers from 2013.

The Tories pledged an annual £150 tax break for basic-rate taxpayers before the election but it had been thought shelved in the coalition agreement.

Treasury sources denied any changes on tax breaks had been made in reaction to the backlash to the child benefit cuts.
Chancellor George Osborne announced on Monday that from 2013 child benefit would be removed from families with at least one parent earning more than about £44,000 a year.

But critics said it would be unfair, because families with two earners, each paid just under the threshold, would still be eligible while those where only one parent works would be hit.

In a letter to Conservative MPs on Tuesday, Mr Osborne said he knew higher-rate taxpayers - those who, by 2013, will be on about £44,000 a year or more - were not "super rich".

But he added: "At a time like this it is very difficult to justify taxing people on lower incomes to pay £1bn in benefits to households that contain higher rate taxpayers."

He also stressed the child benefit cut should "not be seen in isolation" adding: "Other policies contained in the coalition agreement will help families, including our commitment to introduce transferable allowances for married couples."

BBC political editor Nick Robinson said government sources had told him there would be a tax break for married couples introduced in this parliament. 

'One at a time'
In a BBC interview Prime Minister David Cameron was pressed on whether this could be used to compensate some of those who had lost out from the child benefit change.

He said: "I have always supported the idea of supporting marriage through the tax system, specifically supporting the idea of a transferable tax allowance. The idea of a transferable tax allowance is in the coalition agreement.

"It's something we would like to do this parliament but I hope you will bear with me as I try to announce one policy at a time."

Asked whether only basic rate taxpayers - who will not be affected by the child benefit change - would be eligible, Mr Cameron repeated that he wanted to take "one step at a time".
Pressed on whether the policy might be changed to compensate some of those who lose out on child benefit, he said: "The policy in the coalition agreement is not specific; it just says we support the transferable tax allowance."

Among Conservative MPs to raise concerns about the child benefit policy was the former shadow home secretary David Davis, who said it was "an accidental piece of social policy" as it would "encourage wives or mothers to go out to work".

Backbencher Penny Mordaunt said it had been "poorly presented" and, while she supported the principles, she was concerned about the impact on married couples.

And Labour's Yvette Cooper described it as an "unfair attack on child benefit".

Treasury sources denied there had been any change in the tax breaks policy for married couples in reaction to the backlash against the child benefit proposal.
 
Manifesto commitment

In April the Conservatives outlined their plans to give four million married couples and civil partners an annual £150 tax break.

It would have applied to basic-rate taxpayers earning under £44,000 where one partner did not use their full personal tax-free income allowance.

They would have been allowed to transfer £750 of their tax-free personal allowance to their working partner.

But the idea was opposed by the Liberal Democrats.

The coalition agreement drawn up between the two parties said: "We will... ensure that provision is made for Liberal Democrat MPs to abstain on budget resolutions to introduce transferable tax allowances for married couples without prejudice to the coalition agreement."

Health Secretary Andrew Lansley told the BBC it had been made clear in the coalition agreement that the Conservatives would look at offering additional support for marriage in the tax system.

But he added: "Tax matters are a matter for the chancellor of the exchequer and unless and until the chancellor of the exchequer tells us what tax measures he is proposing, I don't think you know or I know what the answer would be."

Backbench MP Richard Ottoway said marriage tax breaks had been a Conservative manifesto pledge, adding: "This is just delivering on our manifesto. It is quite natural it should be coming forward sometime in the lifetime of this parliament."

Asked whether a transferable tax allowance could compensate a mother losing child benefit, work and pensions minister Chris Grayling told the BBC: "I'm not aware about any plans for that. I think we have to be very careful over the next few weeks. We are going to do things that lead to criticism, when we do that we shouldn't try and adjust accordingly."

SIC: BBC/UK