Guests to say ‘I do’ to wedding gift tax relief

As Pippa Middleton, sister to the Duchess of Cambridge, prepares to walk down the aisle this weekend, marking the start of the wedding season, ICAEW is reminding guests of the tax relief available if they choose to make a gift to the happy couple

As the future bride of a multimillionaire hedge fund manager, Middleton has probably spent some time considering her financial position, but Sarah Ghaffari, ICAEW tax manager, says this has been the case for decades.

‘Staying engaged with tax rules has always been important for couples who are planning to get married. For example, a spike in March weddings in the 1950s and 60s can be explained by tax rules at the time- a married man received the full married man’s tax allowance as long as he was married before the end of the tax year,’ Ghaffari said.

While the weather rather than tax policy is now the key issue for most couples, and the summer months have now taken over as the most popular time to get married in England and Wales, ICAEW says guests should not overlook the tax relief available on their gifts to the bride and groom.

The institute says with more and more couples living together before marriage, it is becoming increasingly common for newlyweds to request gifts of cash rather than more traditional gifts such as a kettle or toaster for their new home.

Whatever the gift, all or part of it will be exempt from inheritance tax (IHT) provided the gift is made on or shortly before the date of the wedding or civil partnership ceremony.

The amount of tax relief will vary depending on the relationship between the donor and the recipient.

Each parent (including step-parents) can give up to £5,000 tax free; grandparents can each give up to £2,500; and any other person (such as relatives and friends) can each give up to £1,000.

For couples who both own properties, there will be capital gains tax (CGT) complications once they are married. The main residence exemption for CGT only applies to one property per married couple, so bridge and groom must decide which the exemption will be used for going forward and the second may eventually be taxable if it is sold for a profit.

HMRC does allow time to sort out such ‘overlaps’, but ICAEW points out that an unmarried couple using two houses as ‘homes’ can have one house each, so are much better off.

And in a final tip which may be useful in the Middleton marriage, Ghaffari said: ‘Remember, that if the wedding or civil partnership is called off and you still give a gift, it will not be exempt from inheritance tax. If the couple wish to give a gift to each other on their wedding day, it will be completely free from Inheritance Tax (IHT) and Capital Gains Tax (CGT).’

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