So this year’s Valentine’s Day may have been extra special for some of you, it involved a question, a ring, and now you’re going to get married!!
Congratulations! So before you get embroiled in choosing venues, table plans, favours, flower arrangements and all that comes with organising the biggest day of your life, spare a thought for the tax man, who wants to wish you all the best as you begin your life as a married couple.
Yes, that’s right, he’s not as bad as you might have thought! He (or she!) loves a good wedding, so much so, that as soon as you sign the register, they’ll give you the best present ever – tax breaks!
I know, amazing right?
So, what’s in store for you both as you become legally bound together? Here are some ways in which saying ‘I do’ pays for you.
- Although it’s not nice to think about, inheritance tax could be a massive drain on a surviving partner if you want to pass on your assets. Good news! As a married couple, you can now pass on these assets on death without incurring inheritance tax. Any estate that’s worth more than £325,000 could incur a charge of 40%, but tying the knot eliminates that scenario.
- Then when it comes to passing on any assets to children after the second spouse/civil partner dies, you will be able to use both allowances (i.e. £325,000 x 2) so your estate will have to be worth more than £650,000 before your offspring have to pay any tax at all.
- The adage of what’s mine is yours is true also when it comes to finances within a marriage. If one half pays a lower rate of tax than the other, then you can do a little bit of shifting so that the overall tax bill your household pays is reduced. So, for example, any savings, investments or income from a rental property should be in the lower tax paying partner’s name, and they will consequently pay a lower rate of tax on the interest.
- The same goes for capital gains tax. If you have assets that you want to sell that would be liable for capital gains tax (shares, funds, property, for example) you can use both your allowances to double the limit before this tax kicks in (so up from £11,000 as an individual to £22,000 as a couple). Plus you are free to transfer the assets between you without having to become liable to pay any capital gains tax.
- And if that wasn’t enough, the Government is also introducing new rules, so that from 6 April 2017, there will be an additional inheritance tax free allowance of £100,000 per person which can be used against their home, provided they leave the home to their direct descendants.
(Just to note here, that of course we’re not advising you to get married just for the sake of saving a few bob!)
So there you have it, although it might cost a small fortune to get married, the tax benefits as a married couple could far outweigh the price of a three tier cake long after it’s gone mouldy.
For more information on how getting married could affect your tax liabilities, read one of our previous posts or please get in touch, we can help guide you through the process, and promise it won’t be as painful as choosing the right dress!