Ways to Save – Should You Couple Up to Cut Back on Tax?
The Daily Mail recently revealed that many couples are not staying together out of love, they’re staying together because they simply can’t afford to break up. This new generation of loveless marriages is due to the rising costs of property and the increasing amounts of personal debt.
Almost 10% of those surveyed revealed they’d leave their partner if money wasn’t an issue a number that seems to have risen over recent years. The blame tends to be directed at the couple’s investments in property as when couples split one must buy the other out. This inevitably leaves one half with 50% of the house value, (ignoring mortgage payments) and with little chance of making it back onto the property ladder.
It seems that women are the worst to suffer as an incredible 35 per cent said they wouldn’t be able to afford mortgage payments if their husband left while only 15% of men said the same.
While this news is all doom and gloom there is another side for those that want to stay together, you can couple up to benefit from tax breaks. There are many advantages for couple investors too such as:
The maximum tax allowance for an individual is £10,900 but if you put your assets in joint names you can have double the allowance allowing you to claim nearly £22,000 of tax relief on your returns. You can also double your capital gains tax allowance by joining forces with your other half, and reap the benefits of joint debt consolidation loans to cover multiple repayments.
Partner Your Pensions
You are allowed £40,000 pension allowance every year. As long as it doesn’t go over the 1.25million pound limit you can legally put all your salary into it. That’s 80,000 pound tax relief for both of you a year! (The cap will come into force on 6 April 2014).
Avoid Child Benefit Tax
If you earn over £50,000 per year you are liable to pay 1% on every £100 you earn over that threshold, even if your partner earns nothing. You can avoid this by paying into a partner’s pension to bring your own income below the limit.
Points to Consider
Although the tax relief benefits are considerable, there are still risks involved especially if either of you have children from a previous marriage. Once you put investments, savings etc. into joint names they become marital assets. This means that if anything should happen you each own 50%. Usually this means the surviving partner receives the assets but if there are children from a previous marriage involved of the deceased they can stake a claim. The amount of money it will take to sort this tricky situation is likely to exceed any tax savings you may have made.
Of course a very clear defined will and an executor will go a long way, but it’s a risk that should be considered.