Five Valentine's Day tax breaks for couples that could save you £100,000
VALENTINE'S DAY doesn't have to be that expensive if you take full advantage of the tax system.
UK households are expected to spend £1.5 billion on February 14 this year, with the average person spending £50 according to Finder.
But while the annual religious festival can be costly for those with a partner, there are some big tax benefits to being together.
The Sun spoke to Sarah Coles, personal finance analyst at Hargreaves Lansdown, and Laura Suter, tax expert at AJ Bell, who revealed five ways a couple can achieve financial viability.
Maximize your Personal Savings Allowance
Most taxpayers get a personal savings allowance (PSA). This is the total amount of interest you can earn on all your bank accounts, minus the ISAs, without paying tax.
Under the deduction, basic rate taxpayers, those with an annual income between £12,571 and £50,270, can earn £1,000 in savings income before having to pay tax on it.
Meanwhile, higher rate taxpayers, those earning between £50,271 and £125,140, will receive a £500 allowance.
But if one half of a couple has reached the tax-free limit and the other half has not, you can roll over your savings and use up their remaining PSA.
You can easily transfer your savings from one bank to another.
Laura said: “It used to not be a big problem for many savers because interest rates were so low that you needed a large amount of savings to exceed the limit – but now that interest rates have risen, more people are reaching their limit. “
Taking advantage of lower earners
You pay income tax on your annual income at different thresholds.
For example, if you earn between €12,571 and €50,270, you fall into the basic income tax rate.
Anything you earn between these amounts will be taxed at 20%.
Meanwhile, earn up to £12,570 and you'll pay no income tax.
But if you work together and one person earns significantly less, you can organize your savings and investments so that the lower earner pays taxes at a potentially lower rate.
Laura explains: “If you have a significant amount of savings as a couple and have both exceeded your Personal Savings Allowance, it makes financial sense to transfer the excess savings into the name of the lower earning individual – meaning that any tax due will be lower. . rate.”
But she warned: “Just be sure that the additional income from these sources does not push lower earners into a higher tax bracket.”
Again, transferring money from a savings account can be done via a bank transfer.
In the meantime, you should be able to transfer any investments from one bank to another, but be aware that you may be charged a fee for this.
Marriage allowance
If you are a couple, where one taxpayer pays the basic rate and the other earns less than the personal allowance (£12,570), you can get extra tax help through marriage allowance.
You can transfer €1,260 of your personal deduction to your partner. This reduces the tax by a maximum of €252.
You can also make your claim backdated for up to four years, meaning you could get a maximum of £1,256 back from the government in total, if you qualify for each year.
The maximum amount you can claim back for 2023/24 is €252, while this is the same amount for 2022/23 and 2021/22.
For 2020/21 and 2019/20, the maximum amount you can claim back is €250.
Laura adds: “It also applies if you temporarily have a small income, for example if you are on maternity leave or are going to work less for a few years.
“If your circumstances have changed, it's worth considering whether you might now be eligible, for example if half of the couple have recently retired, gone part-time or taken a career break.”
You can apply for marriage benefit on the government website and call the Income Tax Helpline on 0300 200 3300 for assistance.
You can also apply via self-assessment or by completing a Marriage Benefit Form (MATCF) and sending it to the address on the form.
There is a downloadable version of the form on the government website.
Survivor benefits on a pension
With a defined benefit plan, the amount you receive is based on the number of years you have worked in your employer's plan and what you will have earned when you retire or stop working.
But if you are married and die, some employers will pay 50% of your entitlement to your spouse for the rest of their lives.
If you are not married, it is usually up to your pension administrators whether your partner receives your entitlement.
A trustee is someone other than your employer who is responsible for the management and organization of your pension.
You can also complete a 'designate beneficiaries' form through your pension provider. Here you can indicate who will receive your pension if you die.
But Sarah said: “Make sure you update this if your circumstances change, otherwise your ex could end up with your pension.”
Are you the partner of someone who has died? Then you can submit your pension application by contacting the employer or the pension provider.
If you've lost track of their pension, you can probably find it via the government's online pension tracking service.
Inheritance tax
Inheritance tax is a tax on all property, money or assets (inheritance) that your partner leaves behind upon death.
But you usually do not have to pay inheritance tax on your partner's estate if it is worth less than € 325,000.
If you go above that, you will likely be charged a 40% tax rate.
For example, if your estate is worth €500,000 and your tax-free threshold is €325,000, you will be charged inheritance tax on €175,000 – €70,000.
But that still means your partner pockets £430,000 tax-free.
If you also own a home and leave it to your children (including adopted, foster or stepchildren), your tax-free threshold rises to £500,000.
Sarah added: “It means you can leave everything to your spouse tax-free, and they can then leave up to £1 million to the rest of the family without paying any inheritance tax.”
If you do have to pay inheritance tax, you can do this via a bank transfer on the government website.
Please note that you must pay inheritance tax no later than the end of the sixth month after your partner's death.
If they died in January, you must pay before July 31.
In other news, money-saving expert Martin Lewis has urged employees to check they are using the correct tax code.
Meanwhile, thousands born between two dates could miss out on £2,000 cash from the Child Trust Fund.
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