A financial checklist for your wedding
Tax and pensions are probably the least romantic reasons for getting married, but tying the knot does bring financial advantages!
It has been said that getting married is the greatest tax planning strategy ever invented! Before you get married, discuss each other’s financial circumstances and the issues that you may face together. Here is a checklist for consideration alongside your wedding plans…
1) Update your Will
Did you know that getting married revokes any existing Will? So whilst writing out your wedding invitations, do not forget that your Wills need attention - dying intestate can be disastrous. Talk to a good solicitor to make a Will that best takes into consideration your circumstances and wishes.
From a tax perspective, when you die, any assets left to your spouse, provided they are UK-domiciled, are exempt from inheritance tax (IHT). On top of this, your partner’s IHT allowance is increased by the amount you didn’t leave to others, meaning together a couple can currently leave £650,000 tax-free.
2) Property ownership
Stamp Duty Land Tax (SDLT) may be payable when a share in a property is transferred to spouse.
If the property is received as a gift there's no SDLT to pay, so long as there's no outstanding mortgage on it. However if the person who receives the gift takes over some or all of an existing mortgage, then SDLT may be payable if the value of the mortgage is over the SDLT threshold. You will also need to notify HMRC of the transaction.
3) Wedding gifts can be free from Inheritance Tax
Wedding or civil partnership ceremony gifts are exempt from IHT, subject to certain limits:
- parents can each give £5,000 in cash or gifts
- grandparents & great grandparents can each give cash or gifts worth £2,500
- anyone else can give £1,000 in cash or gifts
The gift has to be made or promised on or shortly before the date of the wedding. If the ceremony is called off and the gift is still bestowed - or if the gift is given after the ceremony without having promised it first - this exemption won't apply.
4) Distribute wealth wisely
Married couples should cut their overall tax bill by distributing their wealth between them so that all personal allowances (CGT, IHT, income tax and ISAs) are used up and tax is paid at the lowest possible marginal rate.
Marriage allowance - £1,100 of one person’s personal allowance can be transferred to the spouse. That is a fixed amount. The spouse making the transfer must have unused personal allowance, i.e. income less than £11,000 p.a. (2016/17) plus any other tax deduction allowances. This cannot be claimed when the receiving spouse is liable to tax at higher rates.
Both spouses must be born after 6 April 1935.
Married couples allowance – if either spouse was born before 6 April 1935 there is an additional allowance available of £835.50 as a reduction in tax. That can be claimed by either spouse.
5) Review your pension
It is important to review your pension with a good Independent Financial Advisor (IFA) to ensure that your spouse and any dependents will benefit in the best way possible when you die.
Widows and widowers can inherit both basic and state second pension based on the contributions of their deceased partner if their accrual is higher than their own.
The State pays bereavement allowance to recently widowed spouses and civil partners. If your spouse or civil partner dies when you are over 45 but under state pension age you may be entitled to bereavement allowance. Bereavement allowance is subject to entitlement ( basically the deceased having paid adequate NIC in qualifying year).
New Forest Tax Accountants have extensive experience in all areas of tax and accountancy. They can also recommend excellent local solicitors and IFAs. Book your free initial consultation today.
© New Forest Tax Accountants 2018.
This communication is intended to provide general guidance on matters of interest and you should not act or refrain from acting upon any information contained in it without seeking appropriate professional advice.