This year’s wedding season is now just starting and it’s a good time to think about a few financial points to consider when you get married or enter a civil partnership. It doesn’t matter whether you’re embarking on your first marriage, or if you’ve been married before; whether you’re in your twenties or nineties, we have some tips for everyone.
1. Have you thought about how you will manage your finances after you are married?
It’s fairly common now for partners, whether married or not, to keep separate finances. This is certainly true of second (and later) marriages. There’s no right or wrong, and you should do what you’re comfortable with. However, bear in mind that lots of financial planning advice involves using tax allowances for married partners, so if you adopt a strict ‘separate finances’ policy, this can mean reducing the options available to you.
2. Watch your budget!
Did you know that the average wedding now reportedly costs around £27,161? When you begin planning your special day, you may have a few ideas in mind. And this is where things can start adding up and you can go way over your intended budget. So agree on a budget and try to stick to it.
3. Gifts from family
If you’re marrying earlier on in life, you might find that your parents are happy to contribute; parents can gift up to £5,000 each towards their child’s wedding and this will be immediately free of inheritance tax (they don’t have to wait the usual seven years for it to leave their estates), therefore it can be a good planning opportunity for them too. Grandparents can gift up to £2,500 in the same say, and you can receive £1,000 between you from anyone else.
4. Update your passport, bank accounts and insurance policies
Okay, this isn’t going to be the first thing you think about when you’ve tied the knot and you jet off on honeymoon, but it will need sorting out eventually. It can take some time to change your name on all your accounts and policies. Usually, you will be asked to provide your original marriage certificate when you change your name on any financial accounts.
From a practical viewpoint, if you have young children with a different surname to you, you may want to make sure your passport shows the same surname to make it easier when travelling together, as border controls are now very alert to children travelling with adults who may not be their parents.
5. Marriage Allowance
Depending on your earnings, it might be worth considering the Marriage Allowance. If one of you earns less than £11,850 per year, you can transfer up to £1,190 of your Personal Allowance to your spouse, which can result in a tax reduction of up to £238 over the financial year.
Depending on your situation, you might want to consider transferring some – or all – of your savings into your spouse’s account, if they have a lower tax rate than yours. If you have received a large pot of cash as a wedding gift, why not consider placing this into a tax-free ISA? Although you cannot open a joint ISA, if you split your money into two ISAs, you will both benefit from being able to save up to £20,000 each tax-free over the financial year.
7. Wills and Inheritance Tax (IHT) for married couples
It’s probably the last thing you want to think about, but are you aware that any transfer of assets or investments between you and your partner is tax-free? And, when one of you passes away, the new ‘main residence allowance’, which came into effect last April, currently allows you to pass an additional £125,000 of your estate tax-free if you pass on your property down to children. This means that your current combined allowance for IHT in 2018/19 comes to £450,000, or potentially £900,000 for a married couple. This is set to increase up to £500,000 each or £1million for a married couple by 2020/21.
And on that note, don’t forget to update your Will once you are married as it is likely to be invalid.
For more information on Wills, Trusts and Inheritance Tax, please speak to one of our team.
If you’re planning to get married and you would like advice on financial planning, please get in touch and speak to one of our financial planners. We will be happy to discuss suitable ways you can save for your big day and for the long term.