Em­brace those fi­nan­cial perks of ty­ing the knot

Birmingham Post - - BUSINESS -

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: tlaw@east­cotewealth.co.uk 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

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