Institute of Fiscal Studies observation

The Prime Minister’s marriage tax allowance announcement has been judged by the well respected and independent Institute of Fiscal Studies and has been found wanting.

The IFS calculated that it would cost £700m a year to provide £200 a year for 3.9m qualifying couples (that’s less than a third of all married couples/civil partnerships). It will only go to 1.4m married couples with children.

The IFS notes that the tax breaks will go to families in the middle or lower-middle of the income distribution (rather than those on the lowest incomes) and that the policy is clearly not a “general recognition of marriage in the income tax system” as it is only paid to much less than a third of all married couples.

So most married couples won’t get the marriage tax allowance, most families with children won’t get the marriage tax allowance and married couples on the lowest incomes won’t get the marriage tax allowance. Which begs the question – who is the marriage tax allowance for?

There is also a note that this very much complicates the income tax system: “it is difficult to escape the conclusion that an income tax system which makes some people worse off after a pay rise has something wrong with it.”. And it concludes that an easier way to help low- and middle- income married couples would be to include a higher work allowance  in Universal Credit.

(these figures have been been changed since we originally posted this in response to the changes the IFS made to their figures)