Married for money?

It’s not the main reason most of us get married, but getting (and staying!) married holds significant financial advantages. Richard Moor talks us through them

As accountants and tax  advisers we are by no means  considered to be qualified  relationship counsellors or  wedding planners. However, while love, thankfully, still tends to be the primary reason couples choose to get married, recent surveys suggest that fewer people are choosing to do so. Some surveys suggest that almost one in eight of us are living together in a long-term relationship as a couple but are not married.

One reason could be that weddings are expensive. The average UK wedding costs more than £25,000 according to Hitched.co.uk. But we have found that a number of our clients weren’t aware of the, sometimes considerable, financial and tax benefits of marriage.

Richard Moor, Director at Bulley Davey Wealth Management explains why you should marry for money. ‘There are many reasons people get married – some for companionship, others for security and many for  tradition – however, not many  would admit to marrying for money, but you should!

‘Firstly, if you and your partner are married you may be entitled to  a tax break called the marriage tax  allowance. The marriage tax allowance is a little-known way for couples to transfer a proportion of their personal allowance to each other. So let’s say we have Richard and Judy. Judy is employed and a higher rate tax payer  but Richard is currently unemployed. Both Richard and Judy have a standard personal tax allowance of £11,000. However, because Richard and Judy are married Richard could transfer some of  his unused personal allowance to Judy  – up to £1,100. This would mean that Judy could reduce her tax bill by up to  £440 each tax year.

‘Also, while the idea of losing a loved one is not something we like to dwell on, 2017 will see some important changes to inheritance tax for those who are married. This makes it even more worthwhile to marry for money.  The most significant of these being the introduction of a new enhanced main residence nil-rate band.

‘Richard and Judy have been together for 50 years but are not married. Upon Richard’s death, Judy’s inheritance of Richard’s estate will be taxed at 40 per cent of everything over £325,000 (the nil-rate band) because he was legally single. Assuming Richard’s taxable estate was worth £1m, this would mean that up to £270,000 would have been lost to the taxman. This allowance will increase to £500,000 by 2020 under the new enhanced nil-rate band measures being introduced by the government. The additional £175,000 available by 2020 is to be treated as a separate allowance and  will only apply to an individual’s main  residence or wealth  created from that  main residence.

‘However, if Richard and Judy were married, there would be no inheritance tax  charge on the transfer of Richard’s taxable estate to Judy as  spouse transfers are exempt. At Judy’s death her estate would be eligible to claim two times the nil-rate band against the value of her personal estate.  This would allow her children or next of kin to inherit her estate tax free up to £650,000 as things currently stand. On an estate worth £1 million this would mean their children would  pay the taxman £140,000.

‘By 2020 the combined nil-rate band and main residence nil-rate band will mean it is  possible to shelter a £1 million estate from inheritance tax, meaning that  Richard and Judy’s children might not have to pay any tax at all.  ‘Sound confusing? It is a little bit. And, of course, there are instances where this new measure might not be of benefit as well.

‘However, in simple terms, if you would rather pass down your hard-earned money and assets to loved ones and family members instead of the  taxman we highly recommend speaking  to an accountant or tax advisor to see  how this could benefit you.’

Bulley Davey  4 Cyrus Way, Cygnet Park, Hampton,  Peterborough PE7 8HP.  01733 569494, www.bulleydavey.co.uk