Benefit from a marriage made in taxes heaven

MARRIED couples have plenty to celebrate this Valentine’s Day, as new research shows that tying the knot can make you £190,000 richer over your lifetime.

Couples who take full advantage of all their tax breaks, including inheritance tax, could be up to £183,714 better off on average if married for 30 years, rising to £190,964 over 50 years, Hargreaves Lansdown found.

These savings come even after subtracting the cost of an average wedding, a whopping £27,161, according to Hitched.co.uk.

Your savings will vary according to how much you both hold in pensions and Isas, and the value of your home. LOVE AND MONEY Hargreaves Lansdown personal finance expert Sarah Coles said married couples should count their financial as well as their romantic blessings: “The numerous tax benefits mean that even in cold financial terms, it may pay to tie the knot.”

However, marrying the wrong person could prove expensive. “Divorce and a possible remarriage will end in a significant financial loss,” Coles added.

Inheritance tax, capital gains tax and income tax can all be less onerous if you are married or in a civil partnership, and there are also allowances to be claimed. MARRIAGE ALLOWANCE Sarah Ghaffari, technical tax manager at chartered accountancy body the ICAEW, said couples should check if they are eligible to claim the marriage allowance. This is targeted at couples where one partner pays standard rate income tax and the other is a non-taxpayer earning less than £11,500 a year.

If eligible, the lower earner can transfer up to 10 per cent of their personal allowance to their spouse. “This can reduce your tax liability by up to £230 in the current tax year,” she said.

You can backdate your claim to include any tax year that you were eligible for the allowance since April 5, 2015, giving a maximum £662 saving. Up to two million couples may be missing out by failing to claim, according to HM Revenue & Customs.

If you or your partner were born before April 6, 1935, you may get more by claiming the married couple’s allowance instead. FAMILY INHERITANCES If a child or grandchild is getting married this year, this could be the opportunity to try inheritance tax (IHT) gifting. “Parents can each gift up to £5,000, and grandparents up to £2,500, without any IHT implications,” Ghaffari said.

Everyone can gift up to £3,000 a year to friends or family members, with instant IHT exemption. However, couples can double this to £6,000 and by making use of last year’s unused allowance, give away £12,000 in total free of IHT. Ghaffari said IHT planning is vital because it is charged at a punitive 40 per cent on assets above £325,000: “However, you can pass on your estate to your surviving spouse completely tax free, regardless of the amount. When they die they could pass on up to £650,000 free of tax.” CAPITAL GAINS There are also capital gains tax (CGT) benefits to marriage as again couples can pass assets to each other without a tax charge.

Everybody gets an annual CGT allowance, which currently allows them to bank £11,300 of gains free of tax, and couples can effectively double this allowance to £22,600.

George Bull, senior tax partner at accountant RSM, said: “This could apply to shares or cash savings held outside of pensions and tax-free Isas, or a buy-to-let property.”

Unmarried couples who pass assets between each other could potentially trigger a CGT charge. PASSING ON Coles said married couples can pass on tax-free Isa benefits to their spouse, although after their death all Isa holdings may be liable to inheritance tax.

Final salary pension schemes typically offer a 50 per cent spouse’s pension, payable for life. If you are not married, it will usually be up to the discretion of the trustees whether an unmarried partner will benefit.