Money can’t buy you love

The Beatles may have sung “Can’t Buy Me Love” back in the 60s but one thing they didn’t warn us about is the fact that love can be exorbitantly expensive (as Sir Paul McCartney later found out during his bitter divorce battle with Heather Mills in 2008).

More than 50 years on and this song (along with many others from The Beatles) has stood the test of time. However, the UK consumer seems to have reached the conclusion that love is, in fact, more than just holding hands as we are spending more money spoiling our loved ones. Although this year Valentine’s Day will be different (no romantic getaways to Paris), brits are estimates to spend nearly £1 billion this year (as per Finders research ).

Usually the hotels and restaurants receive the highest share of consumers’ wallets, this year we expect takeaway to benefit from the big spending binge due to the COVID pandemic. However the true love test will be undertaken by the couples that do not live together: according the same research, 30% of couples that do not cohabit are looking to break the lockdown rules and go full Romeo and Juliet. (Finders research ¹)

It’s not all spend spend spend, however, as a walk down the aisle also comes with certain financial perks:

• On death, if the value of your estate is above the “nil rate band” of £325,000, any excess is subject to an inheritance tax (IHT) charge of 40%. With the introduction of the Residence Nil Rate Band, this increased to £500,000 if certain criteria are met. Saying “I do” can dramatically reduce a substantial IHT bill as assets can be passed free from IHT between spouses on death. Where married couples jointly own a family home and want to leave this to their children, they could have a total IHT exemption of up to £1 million at their disposal.
• Tying the knot also widens your options as far as income tax planning is concerned. If one spouse pays a higher rate of tax than the other then it could be tax advantageous to hold income generating assets in the name of the lower earning spouse (e.g. rental property, dividend paying holdings and interest earning securities; providing it does not exceed their allowances).
• Love is… not only finishing each other’s sentences but also utilising each other’s capital gains tax (CGT) allowances. Assets can be transferred between spouses without any CGT consequences and so if your spouse has not used his or her allowance for the year, you can transfer assets (e.g. shareholdings) to be sold in the name of your spouse, reducing the overall CGT bill. However, as the Beatles taught us, love has a nasty habit of disappearing overnight and so it’s important to remember that transferring assets between spouses can have serious implications.
• She says she loves you and you know that can’t be bad… especially when married life may entitle you to receive a spousal pension from final salary pension schemes, making retirement planning that bit easier.
• So, if the above isn’t enough to make you want to pop the question this Valentine’s Day, just remember that wedding and civil partnership gifts are exempt from IHT (assuming that your guests’ generosity falls beneath the threshold).

On the face of it, Scotland lives up to its stereotype as one of the least romantic regions in the lover’s league, as consumers spend significantly less on Valentine’s Day compared to London where the most lavish lovers live. In our defence, perhaps the people of Scotland simply subscribe to the philosophy that “All You Need is Love”.

Sandar Dailidyte,
Client Senor Manager

¹Source: Finder Valentine’s Day Spending Statistics 2021 by Georgia-Rose Johnson 25th Jan 2021). https://www.finder.com/uk/valentines-day-statistics

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Tax planning is not regulated by the financial conduct authority or the prudential regulation authority

Tax treatment depends on the individual circumstances of each client and may be subject to change in future