To some people, marriage is no longer a necessity. People can live together and stay with each other without formality. However, marriage also has its perks. It is more than just about love, friendship, and companionship. It is also about legal rights and protections. Moreover, it can help you reduce your tax bills through marriage allowance.
How Marriage Allowance Works
When a person gets married, they gain a best friend and a tax break in the UK! It can be a great help for people who want to save on taxes. For example, a person earns £20,000 a year, and their personal allowance is £12,570. This person would typically pay £7,430 a year in income tax. It’s a considerable amount, especially for the younger generation who spend vast amounts of money on entertainment.
If this person marries their partner, they can transfer £1,260 from their personal allowance to their partner. That is already a significant saving. However, as mentioned above, there is a requirement. You have to have lived together for at least three years before you can avail of this privilege. Moreover, you have to be 18 years old and above.
In addition, married couples obtain tax breaks when they decide to have children. For example, if you’re self-employed and a married couple, you can claim tax credits for your spouse’s work-related expenses. Married partners who both work can also claim the tax credits for childcare.
Tax Benefits of Getting Married in the UK
Reduction in Capital Gains Tax Bill
UK laws allow married couples to share their Capital Gains Tax exemption. That means they can claim 50% of their basic personal allowance as tax exemption. Doing so will enable them to save on capital gains tax.
If a person collects a profit from selling an asset, the profit will be subject to capital gains tax. Capital gains rates are usually lower than income tax rates. This exemption allows couples to protect more of their capital gains from taxes.
Reduction in Inheritance Tax Bill
Inheritance tax is not that common in the UK. However, it can add up to a huge amount. If you’re married, you’re allowed to transfer £325,000 of your estate tax-free. A married couple can transfer £650,000 worth of assets before paying any inheritance tax. Moreover, married couples can transfer their unused personal allowance to each other.
That means that they don’t have to pay any inheritance tax if the first person to die already used their personal allowance on the first death.
Continued Pension Even After Death
A pension can be a great asset. However, after death, the original pension is not continued. In the UK, if a person dies before they retire, the pension is withdrawn. However, if they are married, their spouse can continue his pension.
A spouse can also claim a widow’s pension if the husband dies before he retires. However, the pension fund has to be in the husband’s name. The pension fund can be transferred to the wife if it is in the couple’s name.
Getting married can be a wonderful thing. It has a lot of benefits that can help you financially in the long run. That is because of the tax breaks available for married couples. Tax benefits can be a great help, especially for the younger generation who have a lot of financial responsibilities. It can help them save more for the future.
It’s important to note that these tax benefits and exemptions are not given by law. The state grants them. It is your right. If you have questions about marriage tax refunds in the UK or need a tax refund calculator to assess how much you are missing out, we can help. Use our calculator now.