Fewer people got married in Britain in 2007 than at any time since 1862, according to National Statistics. The loss of various tax advantages has been blamed in part for the decline. But while we wouldn’t suggest anyone get hitched purely for tax reasons, there are still some decent tax breaks that married couples should be aware of.
A husband and wife are treated as being separate for tax purposes. This can cut the inheritance tax (IHT) bill on jointly owned assets, such as property, should one spouse die. That’s because the nil-rate band – currently £312,000 – available to each spouse is transferrable to the other. Say a husband and wife have an estate (including their home) valued at £600,000, split equally between them. The husband dies having left a will directing his assets to his spouse. First, there will be no IHT payable on his death. And when his widow dies, his nil-rate band and hers are combined to cut the death estate for tax purposes to nil. Contrast that with a couple living together. While there would be no tax liability on the first death (thanks to the £312,000 nil-rate band), on the second the taxable death estate is £288,000 (£600,000-£312,000).
The other big benefit arises from capital gains tax (CGT). Transfers between spouses don’t trigger a CGT liability on the donor. So a non-working spouse could receive investments from the other, enabling the couple to make full use of each of their income-tax lower rate bands, personal allowances, Individual Savings Account allowances (currently £7,200) and annual CGT exemptions (currently £9,600).
Lastly, if you have any weddings of close friends or relatives coming up, it’s worth remembering that “gifts in consideration of marriage” are made IHT-free. The limits are £5,000 per parent, £2,500 per grandparent and £1,000 for anyone else.