Five tax breaks for couples this Valentine’s Day that could save you £100,000s

VALENTINE’S DAY doesn’t have to work out so expensive if you make the most of the tax system.

UK households are expected to spend £1.5billion on February 14 this year, with the average person forking out £50, according to Finder.

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But while the annual religious festival can work out costly for those with a partner, there are some major tax perks to being in a couple.

The Sun spoke to Sarah Coles, personal finance analyst at Hargreaves Lansdown, and Laura Suter, tax expert at AJ Bell, who revealed five ways being in a twosome can pay off financially.

Maximising your Personal Savings Allowance

Most taxpayers get a Personal Savings Allowance (PSA) which is the total amount of interest you can earn across all your bank accounts, minus ISAs, without paying tax.

Under the allowance, basic-rate taxpayers, those with a yearly income between £12,571 and £50,270, can earn £1,000 in savings income before having to pay tax on it.

Meanwhile, higher-rate tax taxpayers, those earning between £50,271 to £125,140, have a £500 allowance.

But if one half of a couple has hit their tax-free limit and the other hasn’t, you can transfer your savings across and use up their remaining PSA.

Simply transfer any savings from one bank to another.

Laura said: “It used not to be a big issue for many savers as interest rates were so low you’d need to have a large sum in savings to breach the allowance – but now interest rates have risen more people are hitting their limit.”

Making use of the lower earner

You pay income tax on your yearly earnings at different thresholds.

For example, if you earn between £12,571 and £50,270 this puts you into the basic rate income tax band.

Anything you earn between these amounts is taxed at 20%.

Meanwhile, earn up to £12,570 and you don’t pay any income tax.

But if you are in a couple where one person is earning significantly less, you can organise your savings and investments so the lower earner is paying tax at a potentially lower rate.

Laura explained: “If you have a decent amount in savings as a couple and have both breached your Personal Savings Allowance, it makes financial sense for the excess savings to be in the lower earner’s name – meaning that any tax due would be at a lower rate.”

But, she warned: “Just make sure that the additional income from these sources doesn’t push the lower earner into a higher tax bracket.”

Again, moving money from a savings account can be done by bank transfer.

Meanwhile, you should be able to transfer any investments from one bank to another, but bear in mind you may be charged a fee to do so.

Marriage allowance

If you are in a couple, with one basic-rate taxpayer and the other earning less than the personal allowance (£12,570), you can get extra tax help through the Marriage Allowance.

You can transfer £1,260 of your personal allowance to your partner, reducing their tax by up to £252.

You can also backdate your claim by up to four years, meaning you could get up to £1,256 back from the Government in total, if you qualify for each year.

The maximum amount you can claim back for 2023/24 is £252, while for 2022/23 and 2021/22 it is the same amount.

For 2020/21 and 2019/20 the maximum you can claim back is £250.

Laura added: “It also applies if you have a temporarily small income, for example if you’re on maternity leave or you cut back your hours for a couple of years.

“If your circumstances have changed it’s good to think about whether you might now be eligible, for example if one half of the couple has recently retired, gone part-time, or taken a career break.”

You can apply for Marriage Allowance on the Government’s website and call the Income Tax helpline for assistance on 0300 200 3300.

You can also apply through Self-Assessment or by filling in a Marriage Allowance form (MATCF) and sending it to the address on the form.

There’s a downloadable version of the form on the Government’s website.

Survivor benefits on a pension

Under a defined benefit pension scheme, the amount you’re paid is based on how many years you’ve been on your employer’s scheme and what you’ve earned when you retire or leave work.

But if you’re married and you die, some employers will pay 50% of your entitlement to your partner for the rest of their life.

If you’re not married, it’s normally up to your pension trustees whether your partner will receive your entitlement.

A trustee is someone separate from your employer who is responsible for running and organising your pension.

Alternatively, you can complete a “nomination of beneficiaries” form through your pension provider where you can nominate who will receive your pension if you die.

But, Sarah said: “Make sure you update this if your circumstances change, or your ex could end up with your pension.”

If you are the partner of someone who has died, you can start your claim for their pension by contacting their employer or the pension provider.

If you’ve lost track of their pension, you should be able to find it using the Government’s online Pension Tracing Service.

Inheritance tax

Inheritance tax is a tax on any property, money or possessions (estate) left by your partner when they die.

But you usually don’t have to pay any inheritance tax on your partner’s estate if it’s worth less than £325,000.

Anything over this and you will likely be charged a 40% tax rate.

As an example, if your estate is worth £500,000 and your tax-free threshold is £325,000 you will be charged inheritance tax on £175,000 – £70,000.

But that still means your partner would pocket £430,000 tax-free.

If you also own a home and leave it to your children (including adopted, foster or stepchildren), your tax-free threshold rises to £500,000.

Sarah added: “It means you could leave everything to your spouse tax-free, and then they could leave up to £1million to the rest of the family without paying any inheritance tax at all.”

If you do need to pay inheritance tax, you can do this via bank transfer on the Government’s website.

Bear in mind, you have to pay inheritance tax by the end of the sixth month after your partner died.

If they died in January, you must pay by July 31.

In other news, money-saving expert Martin Lewis has issued an urgent warning for workers to check they’re on the right tax code.

Meanwhile, thousands born between two dates could be missing out on £2,000 in Child Trust Fund cash.

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This post first appeared on thesun.co.uk