With Valentine’s Day just two days away, the ICAEW has crunched the numbers to bring some practicality to romance, by pointing out the tax benefits of saying ‘I do’ to a marriage or civil partnership proposal on Wednesday
For those planning an engagement announcement. Sarah Ghaffari, ICAEW technical tax manager, points out that 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.
In some instances, the newly engaged couple can look forward to claiming the marriage allowance to reduce their join income tax bill. To qualify neither of the partners can be higher rate taxpayers and the couple must not be eligible for the married couples allowance available to some older people.
If eligible, the marriage allowance allows one of the couple to transfer up to 10% of their personal allowance to their husband or wife which, in tax year 2017/18, can reduce their tax liability by up to £230.
Ghaffari also points out that a marriage creates more of a ‘fluid’ environment for capital gains tax (CGT) and inheritance tax (IHT), so the couple can pass ownership of assets between them free of tax, regardless of the amount.
While the standard rate of IHT is 40% on estates worth more than £325,000, a married person 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.
Ghaffari said: ‘If you are considering proposing anyway, these tempting tax exemptions could settle your doubts.’
Report by Pat Sweet