Since the Valentines day is only a few days away, I thought it is the perfect time to highlight some of the tax advantages of being married.
Inheritance Tax (‘IHT’)
IHT is charged at 40pc on estates that are worth more than £325,000. If you are married or in a civil partnership, all assets can be passed on to a surviving spouse without any IHT being applied.
The nil rate band of the first deceased can also be transferred to the surviving spouse. When the second spouse dies, both partners’ allowance can be utilised when passing assets on to the next generation. This means married couples can leave £650,000 to their children before IHT is applied.
Wedding gifts to the happy couple from friends and family can be tax effective. Parents can each gift up to £5,000, and grandparents up to £2,500, without facing any tax implications
Capital Gains Tax
Each individual is entitled to an annual Capital Gains Tax allowance for each tax year, currently this is £11,700. Married couples can transfer capital assets between them without giving rise to CGT liability, and can take advantage of both of their annual allowances. This is also useful where one partner pays tax at a higher tax rate than the other. It is possible to transfer assets such as property which generates an income, from the higher tax-rate taxpayer to the lower rate taxpayer.
Income tax
The marriage tax allowance started on 6 April 2015 allows married couples and civil partners to transfer up to 10% of their personal income tax allowance to their partners. This can reduce tax liability up to £238. This will not benefit couples where one pays tax at a higher rate, or both are using their personal tax free personal allowances.
Pension
A spouse is eligible for any widow’s pension if their husband or wife dies, this does not happen automatically when the couple aren’t married.
Contact us if you have any tax questions, or if you are looking for an accountant, quote VS2019 to receive 10% discount on your first year’s accounting fees by appointing us as your accountant.