An unromantic question!

toshkininny

Hi, I live with my partner, and have done for approx 5 years, we have two children.

Would we save tax by getting married, or is it the same 'deal' having a partner?

Told you it wasn't romantic!!!

Petmidget

This will probably get a reply stating every angle to the whole raft of legislation that differs for married couples v unmarried which can depend on lots of other variables.

But in short, NO. You might just get enough over your lifetime to pay for the honeymoon, so long as you only go to Bognor.



Ps I am assuming you and your partner are wage slaves, if you own a business then the answer can be very different.

Mrs_pbradley936

Day to day living will not see much of a difference BUT when you buy,sell or transfer assets like property and shares you save a huge amount by being married.

Tiggs_2

if you have a decent size estate then you will suffer no IHT on death if leaving to each other...if married.

djohn2002uk

Tiggs wrote:

if you have a decent size estate then you will suffer no IHT on death if leaving to each other...if married.

Absolutely correct.
Don't be such a tightwad, go get her a ring...:rotfl::rotfl:

middleman_2

I've been wondering about this too for some time. DH has been once bitten...
Does the same apply in Scotland? I've been told that 'common law' counts for much more up here.

Astaroth

I am curious on the self employed aspect. As far as I was aware that for whilst your living, there is no longer any tax breaks for married couples... what are the benefits if your married and self employed? Does it only count to sole traders or also if you own/ are a Ltd company?

Mrs_pbradley936

middleman wrote:

I've been wondering about this too for some time. DH has been once bitten...
Does the same apply in Scotland? I've been told that 'common law' counts for much more up here.

I really don't know. I am all for living together for a while to make sure it is the right thing for both but prefer the legitimacy of marriage once children, property and other complications begin to intrude into your partnership. I think lots of women have been badly advised about living together because if you split up you can find yourself short changed.

Sharpie

pbradley936 wrote:

I really don't know. I am all for living together for a while to make sure it is the right thing for both but prefer the legitimacy of marriage once children, property and other complications begin to intrude into your partnership. I think lots of women have been badly advised about living together because if you split up you can find yourself short changed.

Marriage has a few tax advantages, although they are not as good as they used to be. There is NO such legal entity as a common law spouse in England (don't know about Scotland I'm afraid).

Tax advantages include Married Couples Tax allowance (albeit if you were born before 6th April 1935...and I'm guessing you weren't.....) Capital Gains Tax exemptions on transfers between spouses and civil partners, and Inheritance Tax exemptions as already mentioned...(although leaving everything to your spouse may not be the best idea to save tax, but thats another issue altogether)

Its also better to be married for pension schemes..many company pension schemes (as opposed to personal pensions) do not recognise non married spouses, and so pay no spouses pensions on death (although they probably would recognise your children). This situation is slowly changing, but needs to be considered..

But its not all about money! Its about love and romance as well (and don't forget the average cost of a divorce is £14K!!!!)

Hope this helps?

WHA

Astaroth wrote:

I am curious on the self employed aspect. As far as I was aware that for whilst your living, there is no longer any tax breaks for married couples... what are the benefits if your married and self employed? Does it only count to sole traders or also if you own/ are a Ltd company?

I'm not sure there is that much difference between being legally married (or civil partnership) or just living together as regards businesses.

What was being suggested, I think, is that you could allocate some profits to the other spouse to use up their tax allowances and lower rate tax bands, i.e. make them a co-shareholder or co-director in a limited company to split the dividends and wages between you.

BUT, if you are just starting up your business, you could still do this with someone you're just living with - there would be no difference. Where there would be a difference is if you already had an established business (that was worth something) and then decided to bring in your partner - if you were married (or CP) the transfer of shares would be exempt, but if not, there would be a chargeable event for CGT based on the value of the shares transferred.

Anyway, all that said, the HMRC are trying to stop it anyway.

These CGT and IHT exemptions are only worthwhile for people with a relatively decent amount of assets. For the average young couple whose only asset may be their house, these exemptions are not really useful at all.

As already suggested, the IHT exemption is not particularly useful either as all it does is put the entire estate to one person who then pays more IHT when they die - it is usually better for one partner to give just a life interest to the other to "enjoy" those assets while they live, but for the assets themselves to pass to their children or whoever else they want THEIR share of their assets to pass to when their partner dies - not only can this be appropriate tax planning to reduce the overall IHT liability, it also avoids the issue of the surviving partner remarrying and for all the joint assets to pass through to the new partner's family instead of the person who died first (if you see what I mean), so it is a common way of doing it anyway.

So, in my opinion, the exemptions are practically worthless anyway for the average younger couple. What would be far more useful is some transferability of unused allowances from one spouse (or CP) to the other which would certainly help young couple when one was a low earner and the other a high earner. It would be nice to think that a couple, both earning say £25,000 per year would pay the same tax as a couple where one earns £5,000 and the other earns £45,000 but sadly in the latter case, the tax bill would be far higher!