It pays to say 'I do' this Valentine's Day
Monday 4 February 2019, It might not be the most romantic reason to propose, but getting married or entering a civil partnership could have tax benefits for you and your spouse.
Sarah Ghaffari, ICAEW Technical Tax Manager, explains some of the tax benefits of getting engaged this Valentine’s Day.
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.
You may be able to claim the marriage allowance to reduce your 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 you to transfer up to 10% of your personal allowance to your husband, wife or civil partner which, in tax year 2018/19, can reduce your tax liability by up to £238.
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.
The family estate
While the standard rate of IHT is 40% on estates worth more than £325,000, you can pass on your estate to your 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 adds: “If you are considering proposing anyway, these tempting tax exemptions could settle your doubts.”
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