Saying ‘I do’ to Valentine’s tax benefits

As couples around the UK get ready for Valentine’s Day, for those wondering whether this is the moment to ‘pop the question’, the ICAEW says that while it may not be the most romantic reason to propose, getting married or entering a civil partnership could have tax benefits

For example, 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.

The newly-married pair may also be able to claim the marriage allowance 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, currently £11,850. In addition the couple must not be eligible for the married couples 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 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.

Sarah Ghaffari, ICAEW technical tax manager, said: ‘If you are considering proposing anyway, these tempting tax exemptions could settle your doubts.’

Report by Pat Sweet

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Comments

How many young couples think of the IHT benefits when they 'pop the question' or that Jeremy Corbyn and John McDonnell would take it away if they were elected?

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