Love, marriage and the taxman

There is a new tax allowance that the Government is urging married couples and civil partners to register for, but honestly, it will be of little benefit to most couples who are considering tying the knot. This new tax break won’t save most married couples money and compared to the cost of a wedding doesn’t really provide much of an incentive. There are other tax and financial advantages though…

Inheritance tax
One of the big advantages of marriage is the ability to pass on assets after your death without incurring inheritance tax. This might not leap out to younger people as an advantage, when they may have a mortgage and debts rather than savings, investments and property.

It is a benefit for all married couple but it is older couples who tend to worry about what will happen to their assets when they die. Currently, inheritance tax (IHT) is charged at 40% on estates that are worth more than £325,000.

However, if you are married or in a civil partnership, all assets can be passed to a surviving spouse without any inheritance tax. Whoop! Or maybe not whoop as they’ll be dead. But every cloud etc… And when the second spouse dies you can utilise both partners’ allowances when passing assets on to the next generation. This means married couples can leave £650,000 to their children before IHT is applied.

Income tax
To save income tax, assets can be arranged so they are owned by the lower-earning spouse. It is possible for married couples to reduce the income tax paid on savings, investments, or on a rental property if one spouse pays a lower rate of tax than the other. For example if one spouse pays tax at 40% and the other spouse is not earning and any savings are held by the non-earner and the interest on those savings are below the personal allowance then they won’t be taxed on that interest.

Capital gains tax
If you are selling assets, for example shares or property, then at current rates you will be taxed on any gain of more than £11,000. If you’re married, however, both spouses have a capital gains tax (CGT) exemption of £11,000, so those assets can be transferred and effectively a couple can realise gains of £22,000 before tax is applied.

If you are married you should inherit any final salary pension your spouse has earned. This can be up to half the pension he or she would get, but you won’t necessarily get this money if you are just living together.

So there you go. A few taxy, if not sexy, reasons to get married.

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About Julia Maltby
Julia’s award-winning business Accountancy Plus has been crunching numbers and saving fortunes for over 22 years and specialises in the creative industries. Julia seriously lives for accounts, VAT, bookkeeping, business and tax planning and tax returns. There’s no accounting for taste. Time-honoured personal services from her team for both business and private accounts.