2020 was a strange year for everyone as lockdowns prevented many of the romantic moments we hoped to have. From holidays and meals cancelled, to others being physically separated as the necessary lockdowns, quarantines and travel restrictions kicked in. And as the days count down to Valentine’s Day, I must admit that I – and I’m sure a few others – have been left scratching around to give something really meaningful.
But, although it might not seem to be the most romantic, and some of the below gestures may only marginally improve your finances, if you are married or in a civil partnership, these gestures communicate thoughtfulness and trust. And they will last far longer than a bouquet of flowers or a box of chocolates.
Here’s our list:
Until 31 March 2021, couples buying a holiday home or an investment property can benefit from the stamp duty temporary holiday by only having to pay the 3% additional tax levy on the first £500,000 of a property’s price.
While stamp duty rates revert to normal after that date, it’s worth noting that HMRC treats rental income on jointly owned properties as being split on a 50:50 basis. As such, rental profits are taxed equally even though many couples are in different income tax brackets. Therefore, if one person within a marriage or a civil partnership does not use their full personal income tax allowance, or is in a lower tax bracket, and if there is still an outstanding mortgage on the property, they can use the holiday to gift the remaining half of a joint property to the lower rate tax payer. You do, however, need to supply HMRC with a valid reason for the change, e.g. the recipient has become more involved in the property maintenance and will continue to do so.
It may also be worth looking into whether it might be more advantageous to move your property into a company, or another wealth structure, ahead of the quarter end deadline. While there are many considerations to weigh up – as we covered in our property tax webinar on 26 November [c. 19 mins] – it remains an option that could be attractive for some, given landlords can offset all mortgage interest against tax when holding property through a company. Meanwhile, in the 2020/21 tax year, just 20% of mortgage interest can be offset on properties held in a personal name.
Given the lifetime allowance for the tax year 2020/21 is £1,073,100, it can be helpful for couples where one partner has exceeded this level, or is likely to exceed it as the limit includes growth on any investments, as well as contributions, to pay into their spouse’s pension scheme. You can transfer the money to make a pension payment of £2,880 and receive a 25% top up from the government, even if your spouse doesn’t have any employment income. Once retired, you would both be able to benefit from personal tax allowances when any pension income is paid out, as well as the 25% tax free lump sums. Your spouse may also be in a lower income tax bracket, which would again benefit your finances as a couple. It’s important to note though that these decisions should be discussed with a professional wealth planner ahead of any transfers as there are often complexities due to your underlying scheme’s set-up.
It’s no secret that many membership organisations have suffered as donor numbers have dropped significantly, with footfall from non-members plummeting too. Giving the gift of a membership to an organisation that supports a family interest, or passion, will give you something to look forward to using, as well as potentially help that organisation survive. You can also help your tax bill. That’s because you can claim for the memberships of some national organisations in your self assessment tax return. Annual memberships from English Heritage, London Zoo, the National Trust and the Royal Horticultural Society, among others, could be tax deductible, depending on the type of membership you take out.
And you do not need to wait until the tax year in question to file for a reclaim. For those looking to take advantage of the extension of 2019/20 tax year filings, any gifts bought between 6 April 2020 and the date you submit your tax return for the year ended 5 April 2020 can be included in that return. You can also call HMRC to amend your tax code if you give regularly.
A further option for married couples and civil partners is to review your savings and investments to ensure they are allocated between the two of you in the optimal manner. This not only ensures you can each take advantage of your own personal allowance for income tax, but it also has implications for other allowances, such as the capital gains tax exemption.
While talking about death will not inspire any romance, changes that came in during September mean that you can still get a Will drawn up via video – providing you follow the rules carefully – despite the latest lockdown. Leaving a spouse or partner intestate can cause numerous issues and especially at a time of grief, and can prove extremely complex to manage. In England and Wales (only), for example, as your spouse will only automatically receive £270,000 under the laws of intestacy, the remainder of an estate is split between your spouse and any children. And although UK domiciled spouses are able to benefit from a partner’s estate without having to pay any inheritance tax, children would only be able to benefit up to your inheritance tax allowance of £325,000.
The opportunities available through a wealth plan can extend far beyond planning for your long-term future finances. Wealth planning also helps you consider your short and medium-term goals, alongside the long-term goals and aspirations, as well as helping you understand what income you might need across retirement – spending that we find most clients struggle to anticipate. Here, a cashflow plan builds in a cushion for inflation and plots spending against future potential investment returns. Taking up a wealth plan may also mean that you can achieve more of your financial goals, and not have to make as many difficult compromises down the line. The earlier the better is definitely key.
And for those that think I’m encouraging you to completely give up on the traditional romantic gestures, please note you can still order a meal from many of your favourite UK chefs and restaurants from our list below, which can be delivered nationally.
Do consider the financial options available to you and get in touch to see if we can help.
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Any examples of investments and structures used are for illustrative purposes only. The inclusion does not constitute an invitation or inducement to buy any financial investment or service. None of the content constitutes advice or a personal recommendation. Nedbank Private Wealth does not provide individual tax advice, and instead works with clients’ existing advisers or can provide an introduction if needed. Individuals should seek professional advice, based on their jurisdiction and personal circumstances, before making any financial decision.
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