Tax Advantages of Civil Partnership and Marriage – 10 FAQs

Tax Advantages of Civil Partnership and Marriage1. Tax advantages of civil partnership and marriage

Did you know there are tax advantages to being in a civil partnership or marriage? This blog looks at the savings you can make on income tax, capital gains tax and inheritance tax. 

2. “Common Law Marriage” does not exist

If you’re living together you don’t have the same rights or tax advantages as if you’re in a civil partnership or marriage. The law is changing in 2019 to extend civil partnerships to mixed sex couples and they will benefit from the same tax breaks as same sex civil partners and married couples.

3. Tax advantages of civil partnership and marriage

  • You can transfer some of your unused income tax personal allowance to your civil partner or spouse
  • Gifts to each other are free of capital gains tax (CGT)
  • Gifts to each other are free of inheritance tax (IHT)
  • You can carry over your civil partner’s or spouse’s unused IHT tax free allowance

4. Income tax

Transfer £1,190 of your personal allowance to your civil partner or spouse if they earn more than you and save £238 tax (tax year 2018/2019). See this guide to how to apply, including backdating.

5. CGT

Civil partners and married couples can gift their assets to each other free of CGT. A gift of assets to the civil partner/spouse who pays a lower rate of tax will mean they pay less tax on income from the asset, and less CGT if they dispose of the asset. Or transfer assets into joint names and you can both make use of your tax free exemption which in 2018/2019 is £11700.

6. IHT

The threshold is £325,000, the standard tax rate is 40 percent. Leave your estate to your civil partner/spouse tax free and they can carry over your unused IHT tax free allowance and save IHT on £650,000 of their estate.

7. IHT on home left to the children (inc adopted, foster or stepchildren) or grandchildren

The threshold rises to £450,000 and a further £25,000 will be added each year until 2020. This means the combined carry over is £900,000 and increases each year until it reaches £1m in 2020. But if your estate is worth more than £2m it’s less beneficial.

8. Are there any CGT downsides to civil partnership or marriage?

Yes there can be if you own a property each. In the case of cohabitees each property can be a principle residence and so exempt. But if you enter into a civil partnership or get married only one property counts as a main residence. There are strict time limits for avoiding CGT on the other property so make sure you don’t miss out.

9. Do I need a Will?

An expert solicitor can help you reduce IHT or avoid it altogether. See my recent blog Do I Need A Will? Here’s One Very Good Reason.

10. Tax advantages of civil partnership and marriage

Contact expert Wills solicitor, Karen Layland, on 01202 798199 or by email karenlayland@just-family-law.com  for free advice on the topics raised in “Tax Advantages of Civil Partnership and Marriage”. In this 20 minute session we will review your situation and how you can achieve your objectives.

JUST FAMILY LAW are specialist divorce and family law solicitors offering personalised legal solutions. We offer collaborative law which is especially relevant in providing solutions tailored to your family’s needs. This includes same sex couples and their families. Visit our website just-family-law.com The topics covered in this blog post are complex and are provided for general guidance only. Therefore if any of the circumstances mentioned in this blog have application to you, seek expert legal advice.

image Couple Working at Home by Unsplash on Wikimedia

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