Is the taxman welcome at your wedding?
According to the Office for National Statistics (ONS) the number of “married family” households is in steady decline, whilst those in the “co-habiting category” is on the increase. However, thanks to a few friendly gifts from the taxman, more people may choose to think again about marriage or civil partnerships.
Recent research from the ONS reveals that despite married/ civil partner couple households still being one of the most common in the UK, their proportion is in decline. Instead, co-habiting couples are quickly overtaking as the category increased by more than 2% in one year, and now represents a total of 3.4 million households.
It seems that attitudes towards marriage/civil partnerships and cohabiting are indeed changing, however, according to an article in the Times recently, that too can go both ways.
The article told of a young couple who had been together for 15 years, had two children and had purchased a couple of properties together. There was never any doubt of their commitment to each other, however, marriage was never on the cards until recently. In fact, one half of the couple simply said it was a low key affair and that they were actually just getting married for the “piece of paper for tax reasons”.
Whilst the taxman is probably the last person on anyone’s wedding guest list, he might still be very welcome - and bring a few gifts of his own too. Inheritance Tax (IHT) rules benefit families who choose to marry or form a civil partnership. It will allow you to inherit the whole of your partner’s estate with no tax to pay - no matter how large it is. Comparatively, an unmarried person can only pass up to £325,000 tax free to their partner before a 40% charge becomes applicable.
As the law stands at present, if you have children, married couples can pass on a home to a direct descendant up to the value of £1 million. Plus, spouses and civil partners can transfer any unused allowance - for example to protect the mother if the father dies, allowing her to pass the estate on their children on her passing.
There is no doubt that IHT is one of the most lucrative for the Treasury, bringing in a record £5.4 billion in 2017-18. Whilst it is deemed the most controversial of taxes, it is easy to see why more couples are choosing to marry - not for romantic reasons, but for financial ones!
As always, we would recommend seeking legal advice if you are estate planning, as it can get tricky if there are re-marriages or children from previous or second marriages to take into account. Also the reliefs and allowances need to be claimed from HMRC so it is important to understand what applies to your family circumstances and that your wills are up to date. If you would like some more information, contact the Private Client team at Downs Solicitors to see how we can help.