Tories announce £150 tax break for four million married couples

Four million married couples will be given a tax break of up to £150 a year by a Conservative government under plans to be announced today by David Cameron. The move – designed to meet the Tory leader's promise to recognise marriage in the tax system – is targeted at couples paying basic rate income tax, many of whom have young children.

The Conservatives put the cost of the promised tax breaks at £550m and said the cash would be raised by a levy on banks that would raise more than £1bn. The policy falls short of the party's original proposal to end what they viewed as discrimination against married couples in the tax system.

It will disappoint right-wingers who were pressing for a single tax allowance for married couples, subsidising mothers who stay at home. But Tory chiefs will hope the policy, which will also apply to civil partnerships, helps the party to build on a largely successful first week to their election campaign.

Mr Cameron recently played down hopes of a big giveaway to married couples, saying: "It's always been more about message than money."

Under his plans, one member of an eligible couple would be able to transfer £750 of their personal income tax allowance to their partner. As the break would be limited to basic rate taxpayers, it would be worth a maximum of £150 at the 20 per cent rate of tax. It would be tapered away at annual incomes above £42,500 so that no higher taxpayer earning more than £44,000 would benefit.

Party sources said the move was a progressive measure, with two-thirds of the benefits going to families with below average incomes. They estimate four million of the country's 12.3 million married couples would benefit.

Labour, which had claimed that offering a tax break to all married couples would cost £4.9bn, will today hit back at the Tory proposals. Ed Balls, the Schools Secretary, and Yvette Cooper, the Work and Pensions Secretary, who are married, will claim that the plans are not properly costed.

Mr Balls has already denounced the "unfair" policy as amounting to "social engineering".

The practicalities of how to recognise marriage in the tax system have created a headache for Conservative strategists. The party's former leader, Iain Duncan Smith, had proposed giving all married couples a single transferable tax allowance, which would effectively subsidise mothers who stay at home.

But the Tory chiefs baulked at the £3bn estimated cost of the policy proposal and the risk that it would be portrayed as penalising working women.

In January, Mr Cameron said the parlous state of the nation's finances meant that he might not be able, as Prime Minister, to afford to offer a tax break to married couples. However, hours later he admitted he had "misdescribed" the position and insisted he would offer financial support to married people in the next parliament.

In February, the Conservative leader took his party's spring conference – and his own shadow Cabinet colleagues – by surprise when he promised to spell out the policy before polling day.

Last night the Tories cited the example of a married couple where one person stayed at home while the other received a salary of £20,000 a year. Under the current system they pay £2,680 in tax. After the non-working partner transferred £750 of his or her unused personal allowance to the other person, the couple would pay only £2,530, saving them £150 a year.

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