10 biggest questions for married couples in the world of UK tax accounting

First off, congratulations if you’ve recently got married. Following the ‘joy’ of the day and the relaxation of the honeymoon, you land back into reality wondering how getting married may impact on your tax status.

Personal tax returns can be tricky at the easiest of times but throw into the mix a marriage and it can mean double the trouble. Two sets of income, assets, debts and deductions. It can be a minefield to navigate it successfully.

Our tax specialists provide solutions to any problems you may have. Here are the most common questions we get asked:

1. Do I have to tell HMRC I’ve got married?

Yes. Within a reasonable time frame, you need to inform HMRC that you have got married. You can do this online or calling them on 0300 200 3300.

2. Do we have a joint personal allowance?

No, for tax purposes you are treated as individuals. You each have your own personal allowance which for the tax year 2019/20 is £12,500.

3. One of us earns over £50,000. Will this affect our Child Benefit claim?

Yes. The High Income Benefit Charge that came into effect on 7th June 2016 states that a household where a claimant’s or spouse’s income exceeds £50,000 are subject to a tax charge on any Child Benefit they receive. Where the income is over £60,000, the tax charge will be 100% of the Child Benefit.

You can elect not to receive Child Benefit; however, this may impact on you and your spouse’s entitlement to receive the State Pension and other benefits. For further guidance on the High Income Benefit Charge, contact us on 0845 880 5678.

4. Can we claim for Married Couples Allowance?
The Married Couples Allowance is a tax benefit for being married. It may be used to reduce your tax bill by between £345 to £891.50 per year, depending on your income. It is only available to those who are:

– married or in a civil partnership, and
– living with their spouse or civil partner, and
– where at least one spouse or civil partner was born before 6th April 1935

For marriages that took place before 5th December 2005, it is the husband’s income that is used to calculate the Married Couples Allowance. For marriages that took place after this date, it is the highest earner’s income that is used.

5. What is the Marriage Allowance?

The Marriage Allowance enables the lowest income earner to transfer up to £1,250 of their personal allowance to their spouse or civil partner. The income of the lower earner must be below their personal allowance (for 2019/20 this is £12,500). Their spouse or civil partner must also be a basic rate taxpayer i.e. earning between £12,501 to £50,000.

Transferring some of your spouse’s personal allowance could have tax implications for them. We strongly recommend you speak to a tax consultant, like ourselves before doing this. You can speak to a member of our tax team on 0845 880 5678.

6. Do I need to update my will?

Yes. As soon as you get married you should update your will to reflect this, as your existing will becomes invalid.

7. Do I need a joint account?

No, it is not necessary to have a joint account. However, you could benefit from tax-free interest on your savings if one of you falls into a different tax bracket.For example, if one is a higher rate taxpayer and the other does not pay tax, keeping savings in an account in the name of the non-tax payer could save tax overall.

8. Do I pay tax on cash I gift to my spouse?

No, in your lifetime you can gift your spouse or civil partner with cash or possessions tax-free, as long as they permanently live in the UK.

9. What are the Inheritance Tax rules for married couples?

The Inheritance Tax rules are extremely complex, and it is imperative that before making any decisions you get professional advice. In a nutshell, you and your spouse each get a tax-free allowance, also known as the nil band rate. For 2019/20 this is £325,000.

Any proportion of the tax-free allowance that is not used on the first death can be transferred to the spouse, for use on their death.

10. How does Inheritance Tax on a property for married couples work?

It is common for the main bulk of an individual’s estate to be made up of property. The new transferable main residence allowance which came into effect in April 2017, increases an individual’s nil band rate by a further £150,000 from April 2019. By 2020/21 this will rise to £175,000. This is only applicable if the property left in the estate was at some point used as a home and only if the property is left to lineal descendants (including adopted or step children).

This extra allowance could effectively give you and your spouse a tax-free allowance of £500,000 each.

The allowance is complex and can be tapered away for large estates, so it is important to seek advice in this regard.

 

Our experienced tax team would be happy to assist with any tax related queries.