I’ll never admit to it in public but I’m a bit of a romcom fan. So, when Harry met Sally, sorry I mean Meghan, I just knew I’d be writing something about marriage, and tax. Now there’s an unusual pairing.
Whilst most may only dream of having such a lavish wedding, the upside is that we won’t have to pay a bar bill anywhere near as close. That said, Harry and Meg probably didn’t pay it all. I’m sure Charlie stumped up a few quid and no doubt at the same time applied his £5,000 marriage gift allowance on top of the £3,000 allowance he might give Harry each year inheritance tax free.
I just want to clarify by the way that I don’t know that for sure, I’m just guessing. Charles isn’t currently my client, and if by some remote chance I manage to find his email address, and he accepts my new GDPR compliant privacy notice email touting for business, and my terms, I still wouldn’t be able to divulge that information. But hey, I might throw in a group discount if Camilla instructs me at the same time.
Anyway, that’s enough about that and leads me on to whether financially it’s worth getting married at all. Or certainly as far as death and taxes are concerned. Well firstly let’s discount the cost of divorce and assume that you’re in it for the long run then we might just be able to make a valid case for it.
If you’re married, or in a civil partnership, you can leave your spouse or civil partner any amount completely inheritance tax free when you die. That’s got to be worth considering. Don’t get too excited though, it doesn’t kill the inheritance tax bill altogether, excuse the pun, it just kicks it down the line until the surviving spouse also departs this earth.
As a married couple though, the nil rate band amount of the first to die transfers to the survivor for that to be used on the second death. Whilst it’s transferred, it only actually comes into play when the surviving spouse dies, and then does so at the prevailing rate at that time. So, to keep the math simple, today’s nil rate band for everyone is £325,000. That means you can leave at least that, inheritance tax free when you die. But if you’re married, say your spouse then survives another 10 years and the nil rate band has increased to £350,000 by that time, then that is the amount that he or she can use from your allowance when applying it to their estate when they die.
The long and short of it is that married couples can benefit from transferring their nil rate band to their spouses on death. That is not available to unmarried couples, regardless of how long you have been together or how many children you have with each other, or even how unfair you think it is.
On top of that the Inland Revenue introduced a new tax break for married couples, called the Residence Nil Rate Band (RNRB), which allows your nil rate band to increase from £325,000 to £500,000 as long as you agree to live until 2021, and leave your main residence to a direct descendant.
That means therefore that married couples could leave up to £1m inheritance tax free to their children. That’s potentially a whopping £140,000 tax saving married couples get over unmarried couples. Starting to make the bar bill seem worth it now?
There are several income tax breaks worth many hundreds of pounds a year too, and of course the right to inherit a state pension when one of you dies. Yeah state pensions are probably not worth much nowadays, but as someone smart said, ‘every little helps’.
The other thing worth thinking about is that unmarried partners don’t inherit from each other. What does that mean? Well, if you are married and you die without a Will, your surviving spouse will get some of your estate. How much depends on whether you have children, and whilst it may not be the amount you would have wanted, he or she still gets something.
Die without a Will when you’re unmarried and your surviving partner gets nothing, nada, niente, nowt. Apologies if I missed your mother tongue out but hopefully you get the point. What you definitely won’t get is an inheritance.
In summary you can decide for yourself if the case weighs more in favour of walking down the aisle or not. All I would say to you is, don’t do it just for the money, make sure you get on with each other at least. The alternative is a hefty exit fee payable on divorce.
For now, let’s enjoy the happy mood of the nation, wait for the movie and look forward to the 2 for 1 tickets from our mobile phone providers.
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