Wedded bliss? Take stock of your nuptial finances

Neil Baker advises married couples to tinker with their tax allowances for the best deal

For richer, not for poorer. As many thousands of newly married couples settle down to their first cosy winter together they should put aside an evening or two for things financial. More long-serving couples might also consider whether their financial affairs are arranged in the most convenient way.

The days when those who got married could look forward to a golden future of increased tax allowances and handouts are long gone.

And even if you have been blessed with a traditionally-minded father of the bride who wants to foot the full bill for the wedding himself, it is still important that couples make the most of the few marriage perks still available.

Changes to the tax rules over the last five years have left married couples with children paying out an extra pounds 2bn in tax, according to Care, a Christian charity. This contrasts with reductions in the tax burden for other people.

The increase in tax bills reflects the gradual erosion of the Married Couples Allowance, the cherished concession that newly-weds could once wave in the face of cynical single friends who asked why they ever bothered tying the knot.

The Married Couples Allowance is currently set at pounds 1,790, compared to pounds 1,720 back in 1991. But it is still worth less than previously. The allowance used to mean that you avoided paying your normal rate of income tax on that amount of your income. So if you paid tax at 40 per cent, when you got married you could stop paying tax on pounds 1,720 of your income, saving pounds 688.

Sadly, tax relief on the allowance was restricted to 20 per cent in 1995, and then 15 per cent in 1996, meaning that whatever tax band you are in the allowance saves you just pounds 268.50. The exception is for when one partner hits 65, the allowance then goes up to pounds 467.25, and pounds 473.25 at 75.

Couples who want to claim the allowance need to contact their Inland Revenue office and let them know that they have got married.

You can claim the increased allowance so long as one partner is, respectively, 64 or 74 at the start of the tax year.

The Revenue will automatically give the allowance to the husband, which means he pays less tax, unless they are told otherwise. But the allowance can be transferred to the wife, or split. If husband and wife have similar- sized incomes, then it does not make a great deal of difference who has the allowance. But there are circumstances where transferring it can further cut a couple's total tax bill. If the husband is not earning but the wife is, the wife should take the allowance. Where one partner can be kept out of a higher tax band if they take the allowance, again it can be worth transferring it.

The Inland Revenue says that wives who want to claim all of the allowance, or a share of it, should contact their local tax office and ask for Form 18. The Revenue also produces a leaflet explaining tax for married couples, ask for IR80.

Newly-weds can also cut their tax bills by rejigging their savings and investments. If the wife, for example, has some dividend income from shares that would push her into a higher income tax band she could give the shares to her husband. Such transfers are also exempt from capital gains tax (CGT).

Couples are also allowed to give each other cash to invest. So if the husband, for example, has used up his limit for investing in a tax-free Personal Equity Plan, he could give his wife money to put into a Pep, assuming she has not used up her limit as well. But Maurice Fitzpatrick of Chantrey Vellacott, the accountants, says that any asset transfer would have to be unconditional to get past the Inland Revenue.

Once you have told the Inland Revenue you are married, tell your bank and anyone you buy financial services from and start shopping around for some of the savings on offer.

Car insurance is one area where cash can be saved. A spokesman for Direct Line, the telephone insurance firm, says: "All insurance premiums are based on actuarial statistics. The simple fact is that married people make fewer claims. Whatever the reasons are, the statistics show that married people are safer, whether they are more responsible or just go out less, I don't know."

Savings can be made on travel insurance as well. The AA's Annual Travel Insurance policy, for example, costs pounds 83.90 a year for one person for any number of trips worldwide but a married couple can take out a family policy for pounds 98 a year, covering two adults and two children. The rates for cover in Europe only are pounds 53.23 a year for a single person against pounds 79.85 for a family.

It is a sign of the times, however, that you might not need to be married to take out a family insurance policy. The AA said couples in a long-term relationship who claim they are a family can apply for the travel policy and some policies will also extend such discounts to gay couples.

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