Transfer some savings to partner before we get married - inheritance tax

chi2000

Hi all,

Me and my partner are due to get married in 3 months time. I want to transfer some of my savings to her now so we can start using her tax free allowance for this year as she's not currently in work. 

Does the 7 year inheritance tax rule still apply to past gift transactions once we are married? 

I'm not sure if it's better to wait until we are married or if it makes no difference providing nothing happens before we get married. 

MX5huggy

No because no IHT is due on estates left to a spouse. 

If you died before marriage tax could be due but it would make no difference whether you had given it or it’s was in your estate. 

phillw

You could draft a loan agreement, then either have her repay the loan after the marriage or you could forgive the debt.

https://www.blandy.co.uk/about/news-and-insights/insights/to-gift-or-to-loan-a-taxing-question-for-families

The value of the loan will remain as part of the estate as an asset. If the loan is ever forgiven it will, at the point of forgiveness and not before, count as a gift instead.

(the rest of the page is not relevant, as it is about loans to other family members & not a future spouse).

spider42

MX5huggy said:

No because no IHT is due on estates left to a spouse. 

If you died before marriage tax could be due but it would make no difference whether you had given it or it’s was in your estate. 

I'm afraid this is not correct. The gift wouldn't be part of an estate left to spouse, it would be a gift made (to a non-spouse) in the 7 years prior to death. Gifts made before marriage still count as gifts under the 7 year rule, even if you get married later. See https://uk.practicallaw.thomsonreuters.com/a-121-5695

You need to be married at the time the gift is made for it to be exempt.

There is an additional relief available for gifts in consideration of marriage, on top of the £3,000 annual allowance. Parents can give an additional £5,000, remoter ancestors (grandparents, great grandparents etc) can give £2,500, and anybody else can give £1,000. Parties to the marriage can also use the £2,500 allowance on gifts to their intended. See https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14191.

So using the additional £2,500, plus the annual £3,000 for two years (assuming it has not already been used in the current or previous tax year), you could potentially give her £8,500. If you want to transfer more than that, then phillw's suggestion is a good one.

Linton

chi2000 said:

Hi all,

Me and my partner are due to get married in 3 months time. I want to transfer some of my savings to her now so we can start using her tax free allowance for this year as she's not currently in work. 

Does the 7 year inheritance tax rule still apply to past gift transactions once we are married? 

I'm not sure if it's better to wait until we are married or if it makes no difference providing nothing happens before we get married. 

Are either or both of you seriously wealthy ie £Ms? Are either or both of you likely to die in the next few years? Unless the answer to both questions is yes I don’t think doing anything about IHT at this stage pre marriage is worth worrying about. Either IHT won’t apply anyway or future events will probably make whatever you do now irrelevant.

If the answer to both questions is yes then I suggest you take professional advice,