Your personal finance questions – Does it make sense from a tax point of view for my wife to give up work?

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Charlie Weston Twitter Email

June 25 2022 02:30 AM

Q My wife and I had our second child last September and she has two months of maternity leave left. She is reluctant to go back to work and we are working out our finances to see if we could manage financially if she decided not to. We both have a good income, are on the higher tax band, and are jointly assessed. From a tax perspective, would we be in a better or worse position if she was to finish up her job?

A Generally speaking, where one spouse is earning above the standard rate cut-off point (SRCOP – the amount of income you can earn before moving into the 40pc income tax rate) and the other cares for children at home, and are jointly assessed, there are significant tax savings to be made, according to director at Taxback.com Barry Cahill.

Under joint assessment, a couple is entitled to an increased standard tax rate band (meaning you can earn more money before reaching the higher rate of income tax than a single person can) and you are entitled to the personal tax credits for married persons.

Where only one spouse is working, with the increased standard rate tax band, a married couple can currently earn up to €45,800 before getting hit with the higher rate of income tax, Mr Cahill said.

As you are jointly assessed, if one spouse stays at home to look after a child for whom you or your spouse receive child benefit payment from the Department of Social Protection, you might also be eligible to avail of the home carer tax credit of €1,600.

Q Is it true that VHI Healthcare has now retired the Health Plus Premium plan? My health cover is very important to me and I have had it for a very long time. So what are my options?

A This VHI Healthcare plan has not been available for renewals since May 1. This is due to the fact that the insurer has reduced the overall number of plans it offers in a bid to simply the choice of plans.

VHI Healthcare is writing to all members and are offering them the option of upgrading to the Premium Care scheme which is the next plan up and is an upgrade in cover, according to Dermot Goode of TotalHealthCover.ie. This new plan was priced at €4,597 per adult, but this has now been reduced to €4,000 per adult from May. Mr Goode said it was his understanding that VHI Healthcare is offering these members a 5pc discount to upgrade to the new plan, which brings the cost down to around €3,790.

This is slightly below the previous cost of Health Plus Premium (it was €3,861 before it was withdrawn). In summary, the new plan being offered is better than the previous plan and is on a special discounted rate for the next year at least, Mr Goode said.

Q I just splashed out €3,400 on a new suite of garden furniture, a firepit and a barbeque. It is a lot of money to spend but we do get good use out of our garden. Will this be covered under the contents on my home insurance, or will I have to get an add on, or even a separate policy to cover it?

A Standard home insurance policies with buildings and contents cover will generally extend to insure your garden furniture or any outbuildings such as a shed or garage. This means they will provide cover for domestic gardening equipment according to the chief executive of Peopl Insurance Paul Walsh. There are, however, a number of exclusions when it comes to contents, and in particular items stored in your garden, he said.

Some insurers will cover items such as garden furniture up a certain amount, usually in the range of €650 to €1,500 in any one claim as it relates to garden contents.

Mr Walsh said that in your case your cover would only extend to about 20pc to 40pc of the cost of your suite, if it was stolen, and for some causes of damage. He said it is worth remembering that as most garden furniture is stored outside, damage caused by frost or weather-related wear and tear is generally excluded under most policies.

Many insurers allow you to upgrade your cover by paying extra, which would protect you for accidental damage. However, its worth checking on this prior to paying as most limit cover on garden furniture to around €3,000 – something to keep in mind with a firepit – or indeed theft.

It is worth bearing in mind that some insurers may require you to securely store or cover expensive items, such as a barbeque, the head of Peopl Insurance said.

Your personal finance questions – Does it make sense from a tax point of view for my wife to give up work?

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