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Tax Benefits of Marriage

Monday, 27 June 2011

Marriage can bring various financial benefits, including flexibility with regards to tax. Below, three key areas of taxation are considered in brief:

Income tax:

If one spouse is a 40% tax payer and the other a lower rate payer, then income bearing assets could be transferred from one spouse to another without any tax implications. This could also potentially reduce the tax paid to a lower rate.

Capital Gains Tax:

No Capital Gains Tax is charged on a transfer of assets between spouses. This again could be utilised to split any burden. In other words, two allowances of £10,600 for a disposal in this tax year could be utilised rather than one, where the asset is in joint names before any disposal.

Inheritance Tax:

If you bequeath assets to your spouse upon your death, the disposal of such assets is not subject to Inheritance Tax (IHT) at 40%. By transferring all assets between spouses via a Will the surviving spouse acquires an additional tax free band, currently valued at £325,000. Therefore, when the surviving spouse also dies, disposal of their assets at that time is not subject to IHT until it exceeds £650,000.

If you would like further advice and assistance on estate planning or other related matters then please contact Head of Private Client on 020 7611 4848 to arrange a consultation.