Marriage and Tax Breaks in the news
Posted: Friday 6 January 2012
Recent BBC coverage of Government debates on the institution of marriage caught our attention. You can read more on the BBC website here. http://www.bbc.co.uk/news/uk-politics-16235463
Whilst this debate continues, an increasing number of people are seeking clarification on the current legal position regarding tax. Sarah McKinlay, Partner and tax expert at Morton Fraser confirms that "how you are treated for tax purposes still depends on the tax being considered:
Income tax – spouses/civil partners each have their own separate allowance and thresholds. The only tax break for married couples is if you are living together and at least one spouse/civil partner was born before 6 April 1935. If a couple married before 5 December 2005 then the husband can claim Married Couple's Allowance; if they married or entered into a civil partnership on or after this date then the higher-earning spouse/civil partner can claim this allowance.
Capital Gains Tax – spouses/civil partners are treated as connected persons i.e. if you and your spouse or civil partner are living together, any transfer of an asset between you is treated as giving rise to neither a gain nor a loss to the person transferring it. Otherwise, each of you will pay tax on your own gains and you will get relief for your own losses.
Inheritance Tax (IHT) – For spouses/civil partners there is an exemption for assets which pass from one spouse/civil partner to the other. Spouses/civil partners also each have their own nil rate band of £325,000, however you can elect to use whatever is available of the nil rate band on the first death, or at the time of the second death (which means that up to £650,000 of your joint estate can pass free of IHT). For example, if one spouse/civil partner dies leaving an estate of £200,000 passing wholly to the children, then the remaining £125,000 of their nil rate band is not lost and can be transferred to the surviving spouse/civil partner for use on their death."
If you would like to discuss your circumstances regarding tax, whether inside or outside of marriage, you can contact Sarah directly on 0131 247 3150 sarah.mckinlay@morton-fraser.com
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