With Valentines Day fast approaching, we wanted to highlight the benefits of being married or in a civil partnership for tax purposes so that you can celebrate these on 14 February and maybe even go and buy that ring!
Married couples and civil partners who are both resident and domiciled in the UK benefit from several favourable provisions over those who just cohabit, including the following:
1) In the 2013 Autumn Statement it was proposed that from 2015-16, married couples and registered civil partners will be able to transfer £1,000 of their income tax personal allowance to their spouse or civil partner, provided neither of them is a higher or additional rate tax payer. This could be used to benefit stay at home mums and families where one of the couple does not use their full annual income allowance.
2) Transfers between husband and wife are deemed to be a no loss/no gain transaction for capital gains tax purposes. Therefore, if you intend to dispose of an asset that has gained in value over and above your annual exempt amount of £10,900 it may be worth considering transferring part of the value in that asset to your spouse or civil partner so that you can both use your annual exempt amounts to offset the gain.
3) The spousal exemption means that no inheritance tax is charged on gifts between spouses and civil partners during their lifetimes and on death which can be particularly useful if you own a property together.
4) Also in relation to inheritance tax, the law now allows the surviving spouse to transfer the unused percentage of their deceased spouses nil rate band, which is the amount that is chargeable to inheritance tax at 0%. The nil rate band is currently fixed at £325,000 until February 2015. With properly structured Wills, the surviving spouse could, therefore, leave up to £650,000 worth of assets free of tax.
5) Even if the spouses or civil partners don’t have Wills, the law makes provisions for the surviving spouse or civil partner. Where partners are simply cohabiting and do not have wills, the surviving partner will not automatically inherit anything, even if they have had children together or have lived together for several years.
If, after some consideration, you are not yet ready to say “I Do” then you should at least ensure that you plan for all eventualities and protect your loved one in the most tax efficient way possible. And all is not lost if you don’t think ‘tying the knot’ is for you as there are other ways in which you can mitigate the inheritance tax payable on your estate.
To find out if you are making the most of these benefits, please contact us at Morrisons by calling 020 8971 1020 or emailing [email protected].