Valentine’s Day approaches, but with romantic gestures likely limited to takeaways and socially distanced walks, leading tax and advisory firm Blick Rothenberg have looked at the tax-efficient side of love.
Stefanie Tremain, a director at the firm said: ‘This year is just not going to be the same, no romantic candlelit dinner parties, no visits to the theatre or that romantic long weekend away but there are some things that you could do to make your partners life a lot easier. They may not sound romantic, but they could make a lot of difference and will certainly be appreciated.’
Give your spouse/civil partner 10% of your personal allowance
If your taxable income is below the personal allowance (currently £12,500) and your spouse/civil partner is a basic rate taxpayer, you can transfer up to 10% of your personal allowance which could save them a tax of up to £250. You can also backdate the claim to include any tax year from 5th April 2016 onwards, provided you both met the criteria in the relevant year.
Make a Covid-wedding gift
Covid-compliant weddings are pretty restricted, but the longstanding inheritance tax exemptions for gifts on marriage/civil partnership are still available (even if you do not make the final limited guest list) and maybe even more valuable. The exemption ensures gifts of up to £1,000 per couple is immediately exempt from inheritance tax. This amount is increased to £2,500 for gifts to grandchildren and £5,000 for gifts to children.
If you’re thinking of transferring assets to your beloved, wait until you’re married
Transfers of assets (such as shares or property) between spouses/civil partners are free from capital gains tax and inheritance tax, but if an asset is transferred before marriage/civil partnership the normal tax rules apply.
Contribute to your spouse/civil partner’s pension
Pension relief has been restricted for high earners, but you can contribute to your spouse/civil partner’s pension although any tax relief belongs to them. For taxpayers, with no relevant earnings, the maximum pension contribution that can be made in a tax year is £2,880 net (£3,600 gross).
Give a gift that keeps on giving
There are many different options for charitable gifts, such as sponsorships, animal adoptions etc. Not only can this be a more meaningful gift, but you can also claim Gift Aid relief on the donation, which means the charity gets an extra 25% from the government and higher or additional rate taxpayers can claim further tax relief from HMRC. If you have made Gift Aid donations in the past and not claimed further tax relief, a claim can be made for up to four years after the year in which the donation was made. For example, relief for a donation made in 2020–2021 can be claimed up to 5th April 2025.
‘If your partner didn’t submit their 2019–2020 tax return before 31st January, save them a £100 late filing penalty and remind them they need to submit it by 28th February 2021. Hopefully, next year will be different and more traditional but it’s always the thought that counts’ Stefanie said.