‘Tax relief on wedding gifts’ – has a nice ring to it

As the wedding season will soon be in full swing, its time to remind guests of the tax relief available on gifts and what to do if the happy couple both own properties.

Anita Monteith, Technical Tax Manager at ICAEW explains: “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:

• Gifts to a spouse/civil partner are completely exempt from IHT.
• Each parent (including step-parents) can give up to £5,000 tax free.
• Grandparents can each give up to £2,500.
• Any other person (such as relatives and friends) can each give up to £1,000.

Anita adds: “For those 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 they 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. The taxman does allow them time to sort out such ‘overlaps’. Of course, an unmarried couple using two houses as ‘homes’ can have one house each, so are much better off.”