The cost of loving

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The right agenda

If you are a re regular reader of this blog, you may recall that my wife and I are expecting a newcomer in the coming days. This new addition leads me to think a bit more about cultural differences and oddities around families. So expect a few blog posts in this area in the next weeks... Yes, maybe I will find some time to write articles during some of these promised sleepless nights. Today, I wanted to draw your attention on how finance and tax influence private family lives.

There are indeed two key dates in the diaries of engaged couples: in France that is June 30th; in the UK, September 1st. Although love is a blinding exercise that drives you towards irrational acts, I have discovered that most of the above-mentioned couples are nevertheless very sensitive about their wallet, when they are about to tie the knot, or procreate.

Yes, I will... Save tax!

Let's take things in the "right" order. I will explain to the non-French readers why June is a key month for couples that are looking at getting married. But first I have to make a slight, though critical, digression on the French tax system. Unlike the UK where you are paying your income tax immediately, the French system waits for your fiscal year to end, consolidates all your incomes including wages, rents, share earnings, etc. and then apply a progressive taxation rates on the last 12 months. As a result the higher your total income, the higher the tax rate.

The second main difference is that the income is calculated by household, not by individual. Two singles leaving together are considered as two separate households with different sources of income, as they are not tied by an official, contractual binding. Marriage is the most common way to be seen, in light of the law, as a household. So from the day you say "yes" in front of the altar, the tax office starts looking at your two incomes as one, with its consecutive taxation rate implications.

If you followed me so far, keep the focus on, as this is the part that gets tricky (and you thought French were crooked).

When Mister A marries Miss B, Mister A as a standalone household stops existing. So is household B. And here comes household A+B. At the end of year, the tax office will look at all three households, and apply the appropriate yearly tax rate on each some income generated during the course of the fiscal year. Mister A's yearly revenue only totals up to 6 months of salary. So is Miss B's. And the couple will only pay taxes on six months of joint income.

This is a fantastic tax saver exercise, as you consequently "half" your income that year, and the tax that comes along. So let's be honest, couples are not getting married during the summer because they want a beautiful blue sky as the background of their wedding picture. They are simply trying to save on tax... probably to afford the expensive wedding anyway.

Give birth, save money.

The myth of the romantic French might have been damaged by the previous paragraph, but I am about to bring the Brits on par. We personally got married in October, because we had found the ideal location, and because we were paying our income tax in the UK anyway, so the above did not apply. During our preparation for the Big Day, we once met with a priest in London who reminded us, and the other couples in the room, that a child was an act of love, not a financial decision.

His sentence made me smile back then. As if everything in London was dictated by finance. As if I had to call an advisor in the City before getting romantic with my better half... Well, now that I have started piling up baby clothes, prams, toys, nappies for a couple months, it might well be the case.

I got struck by the fact that all the Brits around me where congratulating me for my "three-second contribution, life-long commitment", highlighting the fact that our child would be a September baby. At first I thought the entire nation was into astrology and that Virgo was the zodiacal sign to have... But no, their comments were triggered by another, more down-to-Earth consideration.

The British education system seems to have a few rules, including a strict definition of the child's age to enter the system. The child must be 5 during the school year which is September 1st to August 31st. This means that a child born in August will start school just after turning 4. On the other end a child born in September will start school a year later. And it seems that this rule has different impact on who you are talking to. The mother usually feels great about September children, because that mean they can keep them close to their heart for one more year (the child is also likely to be more mature when confronting the harsh life of maths and grammar). On the other hand, some people realise that this additional year may translate into incremental costs: one more year at the nursery...

I pretty sure that some people may make procreation plans like they would manage a business plan. The famous, "not tonight I have migraine" might well be replaced by "not this month, my bonus is jeopardized".

Anyway, that is me being sarcastic. Love is beautiful, and all proof of its celebration, be it a wedding, children or even a small bunch of flowers handed over a departing train... are outcasting all financial considerations. After all, as John Lennon and the Beatles once said "All you need is love".

To read further:

• The end of a myth, or how in 50 years the British sex appeal has plummeted
• Now this is a downturn. a funny twist on what was happening in the City not so long ago
• The bad education. an article on the subliminal messages disseminated in children TV programmes