For richer, for poorer
The Marriage Allowance allows you to transfer as much as £1,190 of your yearly personal allowance to your partner if they earn more than you do.
As long as one of you has an income of £11,850 a year or less – making you don’t earn enough to pay income tax – and the other is a basic 20% rate taxpayer, you are eligible for the relief.
Let’s say that you work part-time in retail earning £5,000 a year. Regardless of your income, the personal allowance of tax-free earnings is £11,850. That means you have an extra £6,850 that you are not claiming.
If your husband, wife, or civil partner earns £30,000 a year and is a basic rate taxpayer, they would still need to pay tax on £18,150 of their earnings after their personal allowance has been used up.
The marriage tax allowance allows you to transfer your unused personal allowance to your partner; bumping up their own allowance to £13,040. That means they could earn an additional £1,190 a year tax-free; saving them £237 in tax.
You can even backdate your marriage allowance claim to cover previous years up to a limit of £900; so the savings you can make as a married couple can be significant.
What’s mine is yours
The government also has special rules for gifting assets to your spouse.
When you give or sell assets like property, shares, or other valuable possessions in the UK you usually need to pay Capital Gains Tax (CGT) on any profit above the annual tax-free allowance of £11,700.
Fortunately for married couples, you do not need to pay any CGT on the assets you transfer to your spouse unless:
- You were separated at the time and did not live together at all throughout that tax year, or
- You gave them the goods for their business to sell on.
This means that you can easily gift your assets to your husband or wife. This can be particularly helpful when you come to sell your investments.
If you are a higher rate taxpayer, you pay between 20% and 28% CGT on your profits if you sell your assets yourself. Giving the asset to your basic-rate taxpayer spouse before selling means they will only be charged between 10% and 18% CGT on the sale of the very same asset.
Furthermore, if you jointly own assets with your partner, you can each benefit from your own tax-free allowances upon disposal. That’s because married couples are still taxed independently from each other.
Let’s say that you were selling a boat you owned equally with your spouse for £55,000.
You and your partner would each have a base cost of £27,500 and be able to use your £11,700 capital gains allowance on your respective halves. This means you would each only need to pay CGT on £15,800 of your profits each; doubling your tax-free allowance on the sale of your boat.
As long as we both shall live
It’s never too early to start saving into a pension scheme. If both you and your spouse can contribute, you’ll be able to save much towards your golden years together.
Many pensioners in the UK today will likely have reached retirement age before the 6th April 2016 and so fall under the old state pension system. This means that, in the event of their death, the surviving spouse is able to claim the equivalent of a full basic state pension based on their partner’s National Insurance Contribution history.
Married couples and civil partners of working age (those that have not yet retired) can also qualify for National Insurance benefits for bereavement should one of them pass away. Speak to your accountant to find out more.
‘Til death do us part
If you’ve only just tied the knot, wills and inheritance are probably the last thing on your mind. However it is still extremely important that you and your spouse have plans in place to make sure you save as much as you can on your tax bill.
Everyone can leave up to £325,000 to someone upon their death completely free of inheritance tax. But there is no inheritance tax to pay at all if you leave everything to your spouse or civil partner.
On top of this, if your total estate is worth less than the £325,000 threshold you can add your unused allowance to your partner’s threshold when you pass away. That means they could leave behind as much as £900,000 before inheritance tax applies to your estate.
You may not be aware that any wills you have in place are voided automatically when you get married. You should draw up a new will as soon as possible following your wedding to make sure your spouse receives your estate as you wish.
We can help
Whether you’re looking at joint bank accounts or buying your first home together, you and your new spouse have lots of important things to think about. While you and your spouse are busy starting your new lives together, Sunny Accountants are here to take care of your finances for you.
If you’d like to know more about your tax liabilities as a married couple or any other tax related matters, call us today on 01623 559 362 or email us on [email protected] for professional tax advice and guidance.
For a free chat on how we can help you, please complete the contact form below and we will be in touch.