Separate taxation

Separate taxation is a system where each spouse in a marriage is taxed individually based on their own income, rather than combining their incomes for a joint tax assessment. This method ensures that each person’s tax liability depends solely on their personal earnings, deductions, and allowances. In some countries, separate taxation is mandatory, while in others it’s optional, allowing couples to choose between joint or separate filing based on which provides a better tax outcome. This approach promotes individual financial responsibility and can be beneficial when there is a large difference in the spouses’ incomes or when each has different deductions or credits.

Example: In the United Kingdom, married couples and civil partners are generally taxed separately. Each person files their own tax return, reports their own income, and pays taxes individually. However, certain allowances—like the Marriage Allowance—allow a portion of one spouse’s unused personal allowance to be transferred to the other to reduce their tax burden.