Embrace those financial perks of tying the knot
THERE has been loads of coverage recently concerning the Marriage Allowance and many people’s failure to claim it.
It followed HM Revenue & Customs’ figures which revealed that married couples and civil partners have missed out on more than £1.3 billion since the concession came into force in 2015/16.
But this is actually the tip of the iceberg in terms of the financial advantages of getting married as opposed to simply living together.
For example, when one of you dies, the surviving spouse won’t have to pay inheritance tax (IHT) on their partner’s assets. They will also inherit their spouse’s unused inheritance tax allowance, making it highly lucrative to pass on assets to the next generation. A surviving spouse will also get automatic right of inheritance in the case of their husband or wife dying intestate, whereas an unmarried partner would not.
Then there are generous rules surrounding tax on savings and investments
If one of you pays tax at a higher rate, a simple way to retain extra cash is to transfer some of your savings and investments to the person paying the lower rate.
Equally, married couples each have their own capital gains tax (CGT) allowance, but transfers between spouses are exempt from CGT. This means it’s possible to transfer assets between one another to make the most of both spouses’ annual CGT allowance.
Another little known perk is bereavement allowance.
This is a payment from the Government given to widows for up to 52 weeks. To qualify, you have to be between 45 years old and state pension age when your partner dies.
Your exact entitlement depends on your age and your deceased partner’s National Insurance contributions.
So why do governments discriminate in favour of married couples?
Quite blatant really – it is to reward the institution of marriage, producing what most believe to be a more stable family environment. It also helps those parents who want to stay at home to bring up the children.
So all the more reason to maximise these opportunities.
The Marriage Allowance was designed to help married couples and civil partners where one pays basic rate tax and the other is a nontaxpayer – earning nothing, or less than the current personal allowance of £11,500 – by enabling them to make more efficient use of their combined income tax allowances.
Under the rules, the non-taxpayer can transfer up to ten per cent of the full value of the personal allowance, provided it has not been used, to their higher-earning partner.
Under the current rate the transfer would be worth up to £230 a year – 20 per cent of the £1,150 personal allowance transferred – to a couple. However, you can claim this tax year and previous tax years – so it could save £662 in tax.
Disappointingly, since its introduction, only 2.2 million couples have taken advantage, from 4.2 million eligible – despite HMRC running several advertising campaigns seeking to persuade people to apply.
Yet, numbers are on the rise – last year, HMRC reported that only a quarter of eligible couples were claiming.
“Applications have increased year on year. The application process is easy, and families can apply at a time which is convenient for them,” a spokesperson said.
HMRC will typically give the recipient partner their extra allowance either by changing their tax code or via the self-assessment tax system.
The lower earner’s personal allowance will transfer automatically to their partner every year until one of them cancels the arrangement or their circumstances change – for example, because of divorce or death.
To apply for the marriage allowance online, go to www.gov.uk/marriage-allowance.
Trevor Law is managing director of Eastcote Wealth Management, chartered financial planners, based in Solihull. Email: email@example.com The views expressed in this article should not be construed as financial advice
This is actually the tip of the iceberg in terms of the financial advantages of getting married as opposed to simply living together