‘Kelly’s Know-how’ – September 2020 edition
Work as a team to get tax perks (for married people or in civil partnership)
I have had a number of meetings recently with people who were unaware of some of the tax allowances or perks they are entitled to as a married couple/civil partners. We all know our individual allowances, but often don’t realise that we could be better off by working together!
As a result, I’d like to take the time this month to look at a couple of the key benefits that are commonly overlooked.
Could you be unknowingly out of pocket?
Every individual, unless they have high earnings above £100K, has a Personal Allowance: an amount of money that you can earn without paying any income tax.
In the current tax year, 2020-21, the Personal Allowance amount is £12,500. This means that from 6th of April 2020 to 5th April 2021, you don’t pay tax on anything you earn up to £12,500.
However, what if you earn less than £12,500? Does this mean that the remainder of the personal allowance is lost? Not necessarily.
If you are married or in a civil partnership, you could make use of the Marriage Allowance.
Marriage Allowance lets you transfer £1,250 of your Personal Allowance to your husband, wife or civil partner, as long as they are a basic rate tax payer, so earning between £12,500 and £50,000 themselves. Doing this reduces their tax bill by up to £250 in the current tax year.
What’s more, if you think you’re entitled but have never claimed this, don’t worry, you can backdate a claim up to 4 previous tax years, plus the current tax year. So, that’s potentially over a thousand pound’s worth of tax straight back in your pocket. Not to be sniffed at!
What if you are thinking about selling a property, investment, shares? This brings us to another type of tax: Capital Gains Tax.
Every individual has a Capital Gains Tax Exemption. In the current tax year this is £12,300, which means that you won’t have to pay capital gains tax on any gains made within this amount.
But what if you own shares/property/investments solely in your name, and the gain from selling is going to be higher than the capital gain exemption amount? Did you know that you could transfer some ownership to your spouse or civil partner before selling? This way, you can benefit from 2 capital gain exemptions, doubling the amount you can receive before paying tax.
These are just some examples of how Lucent can help you maximise your wealth, by ensuring you are using all of the tax perks available to you in the most efficient way. Tax can be confusing and the rules can change, so sit back and let us help you make sense of it all!