Well, that’s not strictly speaking true. I’m sure we’ve all spent a little more than we could afford under the spell of Cupid’s Arrow, especially when trying to impress on that first date. But ever considered how much getting married could save in tax?
First of all, gifts between spouses and civil partners are free of inheritance tax. Yes, you can give your Mrs or your Mr as much as you want while you are alive, provided they live in the UK. That’s not the case for cohabiting partners however. If you’re not married there is no such exemption, and any amount you leave to your partner when you die that exceeds the inheritance tax nil rate band of £325,000 (2016/17 tax year) is subject to an eye watering 40% tax. So, if you have an estate worth £500,000, not a lot at today’s values, and remember that includes things like life insurance (you’ll probably find you’re worth a lot more dead than you are alive!) take away the nil rate band of £325,000 to leave an amount of £175,000 which is taxed at 40%. (Take a seat to read the next bit) That will land you with a £70,000 inheritance tax bill to pay, and that’s pricey even for a big wedding. See, I said in my last article It's a Family Affair that tying the knot might be cheaper than you think.
It’s not all rainbows and butterflies when you walk down the aisle though. Leaving something to your spouse or civil partner might be free of inheritance tax, but in doing so you swell the estate of the person that’s left behind. For example, to make the math easy let’s assume you have an estate of £500,000 and so does your spouse. The two estates together therefore are worth £1m. If you transfer your nil rate band allowance to your spouse when you die, he or she will now have your nil rate band allowance and theirs. That’s a total of £650,000 that they can now gift tax free on their death. (£325,000 x 2) Anything above the £650,00 is taxed at 40% (£140,000)
These figures are pretty hair raising even for fairly modest estate values. Be sure to get some advice from a specialist and start planning early, you might just save your loved ones a tidy little sum.
This information provided in this article is not intended to constitute legal advice and each relationship breakdown requires careful consideration in our view by a fully qualified Solicitor before decisions are made and before you embark on a certain course of action.
079 77 30 77 30