Saying ‘I do’ to Valentines Tax Benefits
With Valentine’s Day just around the corner, couples around the UK may be wondering whether this is the moment to ‘pop the question’. According to the ICAEW, whilst it may not be the most romantic reason to propose to your partner, getting married or entering a civil partnership could bring it with it certain tax benefits.
An example of this could be the wedding gifts received from friends and family. Parents can each gift up to £5,000, and grandparents up to £2,500, without facing any tax implications.
Furthermore, the marriage allowance may also be able to be claimed by the married couple to reduce their income tax bill. To qualify neither of the partners can be higher rate taxpayers, and the lower earner must have income below the personal allowance of £11,850. In addition the couple must not be eligible for the married couple’s allowance, which is available to some older people. If eligible, the marriage allowance allows one partner to transfer up to 10% of their personal allowance to their husband, wife or civil partner which, in the tax year 2018/19, can reduce their tax liability by up to £238.
In addition, ICAEW points out that a marriage creates more of a ‘fluid’ environment for capital gains tax (CGT) and inheritance tax (IHT), allowing the couple to pass ownership of assets between them free of CGT and IHT, regardless of the amount.
While the standard rate of IHT is 40% on estates worth more than £325,000, an individual can pass on their estate to their surviving spouse completely tax free, regardless of the amount. When the surviving spouse dies it can be possible for up to £650,000 to be passed on to family and friends tax-free.
Ken Dodd left it late marrying his partner of 40 years, 2 weeks before he died and this saved his estate £11 million in Inheritance Tax.