The current government is keen to support married couples and civil partners and there are several tax breaks available to married couples. These are:
Introduced in April 2015, this means that where one spouse or civil partner is a basic rate taxpayer and the other either doesn’t work or earns less that £10,600, the non-worker can transfer 10% of their personal allowance to the worker. Using the marriage allowance would save £212 in income tax.
ISAs are transferable between spouses and civil partners on death. This means that the survivor can continue to save or invest the money tax-free, and is particularly valuable if the deceased had built up a considerable amount in ISAs.
Married couples and civil partners can transfer assets to each other without capital gains tax becoming payable. This means that if one partner wants to sell an asset at a profit that will exceed their capital gains tax allowance, they could transfer part of the asset to their partner or spouse first (e.g. some of the shares if the asset is a shareholding) to use the partner’s/spouse’s allowance as well as their own.
The biggest tax advantage to being married comes in the event of death. There is no inheritance tax to pay when assets are passed between spouses or civil partners. Furthermore the nil rate band for inheritance tax, which is £325,000 for individuals, can be inherited by the surviving spouse. When the second spouse/civil partner dies, they will have their own £325,000 allowance plus whatever was remaining of the first spouse’s/partner’s nil rate band, allowing for up to £650,000 in total to be passed on inheritance tax-free.
When a married person or person in a civil partnership dies, their spouse/partner is first in line to inherit under intestacy rules. However, these rules may not suit an individual’s circumstances if for example there are other friends and relatives to provide for so it is still important to make sure an up to date Will is in place.
Unfortunately there is no such thing as a common-law spouse so couples who are not legally married or in civil partnerships do not benefit from the tax advantages listed above. In particular unmarried couples should be mindful that in the event of death the surviving partner would not receive anything at all under the rules of intestacy. Any assets, unless held jointly, would pass to surviving children, siblings or parents instead.
If you wish to discuss your personal tax planning please contact Richard Higgs on 0117 966 5699 or firstname.lastname@example.org.