Marriage Can Make You Better Off

This week the ‘feel-good’ factor is everywhere. We have cheered sporting success, with Murray achieving an amazing victory at Wimbledon, the British Lions triumphant in Australia, and Chris Froome leading the Tour de France. Business confidence in the UK has reached a 13-month high as companies report higher levels of business and increased job creation, supporting the view that the economy is finally on a gradual road to recovery.

Whilst the survey by Lloyds showed the greatest improvement in London, the North West and West Midlands, the South West nevertheless appears to be performing well in comparison with other parts of the country. Finally, Summer has arrived with the hottest temperatures of the year expected this week.

This ‘feel-good’ factor is a great backdrop for a traditional Summer wedding and across Devon and Cornwall we have numerous churches and other venues in idyllic places ideally suited for wedding celebrations. Of course, nobody should marry for financial advantage, but the recent political debate of giving married couples a tax break of up to £150 a year is modest when many couples spend over £10,000 on a wedding.

However, there are already much more valuable tax breaks for married couples. Where one partner pays tax at the higher rate and the other partner is a non- or basic-rate taxpayer, significant amounts of Income Tax can be saved if the non-taxpayer holds the investments. Married couples can also mitigate Capital Gains Tax as assets can be transferred from one spouse to the other free of tax, ensuring that any gains benefit from two tax-free annual exemptions and make maximum use of basic rate tax bands.

In many cases, the most valuable tax break for married couples is Inheritance Tax, where assets can pass to a spouse free of Inheritance Tax on death, whereas to any other recipient amounts above £325,000 are taxed at 40%.

Aside from tax, final salary pensions generally provide a dependant’s pension for a spouse or civil partner. Whilst some pension schemes will pay a dependant’s pension to an unmarried partner, this is by no means the general rule. Such pensions can be very valuable for widows and widowers.

In addition to tax and pension benefits, marriage also provides a good framework for long-term financial planning, with only 2% marriages ending in divorce after 30 years. Such long-term planning is ideal for both partners to target financial security as they go through each stage of life.

Getting married is an ideal time to review your finances. Pre-nuptial agreements are growing in popularity, particularly with people marrying for a second time, as well as an excellent way to discuss financial arrangements with a prospective partner. Then, once married, it is important to make a new will and update any life assurance and pension beneficiaries to reflect your wishes.

[Matthew Clark, Western Morning News, 11 July 2013]

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