Tax Breaks for wedding gifts and married couples

Following the royal wedding, Elaine Skelton, Head of Personal Tax at leading independent firm of Chartered Accountants Barber Harrison & Platt thought this a good time to remind individuals who may be thinking about wedding gifts for the forthcoming ‘wedding season’ about the possible tax benefits of making a gift to the happy couple.

Many couples have already set up their first home together before marriage meaning that the traditional wedding list is quickly becoming redundant.  Instead, couples frequently request money as a wedding gift. Significant gifts can often pose a concern for inheritance tax purposes, however, in the context of marriage, gifts can benefit from generous tax reliefs without impacting upon an individual’s £3,000 annual exemption.

The extent of the relief depends on the relationship between the giver and the happy couple: a parent (including adoptive and/or step-parents) of the bride or groom can gift up to £5,000 each without any inheritance tax implications; similarly grandparents can each gift up to £2,500; and other relatives and friends up to £1,000. 

Once married, couples can also make gifts to each other free from inheritance tax and capital gains tax by making use of exemptions available for transfers between spouses.

Elaine Skelton says ‘tax planning should not, however, end on your wedding day. Couples should also consider restructuring how they hold their assets to ensure that maximum use is made of all available exemptions, especially when one spouse may be a higher earner than the other. Holding assets jointly before disposal can ensure both spouses make full use of the annual exempt amount and minimise any resulting chargeable gain.’

Whilst not all couples will have their choice of castles, many brides and grooms will come to the marriage each with their own home. Consideration should be given to which house should become the couple’s principal residence and therefore be exempt from capital gains tax, as a married couple may only have one qualifying residence.

Finally, couples should consider long term estate planning. Often couples fail to realise that any wills made prior to the marriage become invalid following marriage and as a result do not execute new wills. Elaine Skelton added ‘this is especially important with the increase in second marriages as the rules which apply where there is no valid will are generally inappropriate for today’s complex family relationships.’