Index
Why You Must Notify HMRC About Your Marital Status
The importance of informing HMRC (Her Majesty's Revenue and Customs) about your marital status in the UK cannot be overstated. Whether you have recently tied the knot, entered a civil partnership, or have experienced a divorce, informing HMRC about changes to your personal life has both financial and legal implications. Keeping your records with HMRC updated ensures that your tax obligations are correct and that you can access any benefits or allowances to which you may be entitled. It also prevents errors in your tax deductions that could result in overpayment or underpayment.
1.1 Understanding HMRC’s Role in Your Financial Life
HMRC is responsible for collecting taxes, including income tax, national insurance, and other payments like child benefits and tax credits. Your tax code, which determines how much tax is deducted from your income, is partly based on your personal situation, including your marital status.
When you get married or form a civil partnership, you must update HMRC so they can adjust your tax code accordingly. Failure to do so can result in incorrect tax calculations. For example, if you do not notify HMRC, you may continue to be taxed as a single person, missing out on certain allowances such as the Marriage Allowance, which could save you up to £1,260 in tax each year (as of 2024).
Likewise, if you divorce or separate, it’s equally important to inform HMRC to ensure your tax code reflects your new status and that your tax obligations are updated. This includes removing any Marriage Allowance you may have been entitled to during your marriage.
1.2 The Marriage Allowance: A Key Financial Benefit
One of the most important reasons to tell HMRC about your marriage is to claim the Marriage Allowance. The Marriage Allowance allows one partner in a marriage or civil partnership to transfer up to 10% of their personal tax allowance to the other partner. In 2024, this amounts to a transfer of up to £1,260 in tax-free income, which can reduce the tax liability of the higher-earning partner.
To be eligible for the Marriage Allowance:
One partner must be a non-taxpayer (earning below the personal allowance threshold, which is £12,570 in 2024).
The other partner must pay income tax at the basic rate, meaning their earnings are between £12,571 and £50,270.
By transferring some of the non-taxpayer’s personal allowance to the basic-rate taxpayer, the couple can collectively pay less in tax. However, this benefit is only available if you inform HMRC about your marriage or civil partnership. If you fail to do so, you may be missing out on this valuable tax break.
Additionally, HMRC allows you to backdate your Marriage Allowance claim for up to four tax years. This means that if you were eligible for the allowance in previous years but did not claim it, you can apply retroactively and receive a tax refund.
1.3 Potential Penalties for Failing to Update Your Marital Status
While updating HMRC about your marriage offers clear financial benefits, failing to do so can lead to various problems. First, you may end up paying more tax than necessary because your tax code is incorrect. This could be due to missing out on the Marriage Allowance or due to the tax code not reflecting your new status as a married person.
On the other hand, not informing HMRC of a divorce or separation can cause issues as well. If you continue to benefit from allowances like the Marriage Allowance after a separation, you could face a tax bill later. HMRC can reclaim any allowances you were not entitled to, and you may have to pay interest on underpaid tax.
In some cases, failing to update your details may even lead to penalties. HMRC expects taxpayers to keep their personal details up to date. Deliberate or negligent failure to do so can result in fines, especially if it leads to underpayment of tax.
1.4 How to Inform HMRC About Your Marriage
Notifying HMRC about your marriage is a relatively straightforward process, but it’s essential to act quickly. You can update your details through several methods:
Online via your personal tax account: This is the easiest and fastest way to update your marital status. Log into your personal tax account on the GOV.UK website, and update your details under the “personal details” section.
Through Self Assessment: If you complete a Self Assessment tax return each year, your marital status can also be updated when you submit your return. This ensures that both PAYE (Pay As You Earn) and Self Assessment tax records are updated simultaneously.
By phone or post: For those who do not use the online system, you can contact HMRC by phone or write to them, providing your updated details. You will need to provide your National Insurance number, and other relevant information, to process the change.
In all cases, you will need to have your National Insurance number on hand and any relevant marriage or civil partnership documentation. The process of updating your status is free, and once HMRC has processed the change, they will send you confirmation, along with a new tax code if necessary.
The Impact of Divorce or Separation on Your Tax Status
While getting married and informing HMRC of your new status can bring financial benefits, it's equally important to notify them if your marriage or civil partnership ends. Whether through divorce or legal separation, updating your marital status with HMRC is crucial to ensure that your tax obligations are correct. Failure to do so could result in financial complications, such as overpayment or underpayment of taxes, and even penalties.
2.1 How Divorce or Separation Affects Your Tax Code
When you are married or in a civil partnership, your tax code reflects your marital status. This is especially important if you are claiming Marriage Allowance, as your tax code will be adjusted to reflect the transfer of allowances between you and your partner. However, once you separate or divorce, your eligibility for the Marriage Allowance ends. If you fail to inform HMRC, you could continue to receive this allowance, which will lead to an underpayment of tax.
Let’s look at an example:
Example 1: Tom and Emma
Tom and Emma were married for five years and claimed the Marriage Allowance. Emma earned below the personal allowance threshold (£12,570 in 2024), and Tom, who earned £35,000 annually, was eligible for the basic rate tax band. Emma transferred 10% of her personal allowance (£1,260) to Tom, reducing his tax liability.
However, Tom and Emma decided to separate in early 2024. While they both moved on with their lives, neither of them informed HMRC about their separation. As a result, Tom continued to receive the benefit of the Marriage Allowance, and his tax deductions were based on the outdated tax code. By the time Tom submitted his tax return for the year, he was informed that he had underpaid tax due to the continued use of the Marriage Allowance, despite being separated.
Not only did Tom have to pay the amount owed back to HMRC, but he also incurred interest on the underpaid tax. Had Tom and Emma informed HMRC immediately after their separation, they could have avoided these financial issues.
2.2 Implications of Asset Transfers and Capital Gains Tax in Divorce
Another critical aspect to consider in the case of divorce is the transfer of assets between spouses. When couples separate, there is often a division of property, savings, and investments. While transfers between spouses during marriage are generally exempt from Capital Gains Tax (CGT), this changes once a divorce is formalized or separation is legal.
During a marriage or civil partnership, asset transfers between partners are not subject to CGT. However, after divorce or legal separation, any transfers of assets between ex-spouses are subject to normal CGT rules. This can lead to significant tax liabilities, especially when valuable assets like property, shares, or savings are involved.
Example 2: Sarah and Michael
Sarah and Michael decided to end their marriage in 2024. As part of their financial settlement, Sarah transferred her share of an investment property they co-owned to Michael. During their marriage, this transfer would have been exempt from Capital Gains Tax, but now that they are divorced, it becomes a taxable event. The value of the property had increased significantly since they first bought it, and as a result, Sarah faced a substantial CGT bill after transferring her share to Michael.
In this case, if Sarah had transferred her share of the property before the divorce was finalized, the transfer could have been exempt from CGT. Failing to plan the timing of asset transfers during divorce proceedings can lead to unexpected and costly tax liabilities. It’s crucial to consult a tax adviser or accountant to avoid these pitfalls and to inform HMRC of changes in ownership promptly.
2.3 Child Benefits and Separation
Another key financial consideration after divorce or separation is the impact on Child Benefit. Child Benefit is a payment made to parents or guardians to help with the costs of raising children. If your relationship status changes, it’s essential to inform HMRC, as this can affect who is entitled to claim Child Benefit and how much they receive.
For couples who were claiming Child Benefit as a unit, the higher earner in the household might have been subject to the High-Income Child Benefit Charge (HICBC) if they earned over £50,000. After a separation, the parent with primary custody of the children typically becomes responsible for claiming Child Benefit. However, if the higher earner no longer lives with the children, they may no longer be liable for the HICBC.
Example 3: Lucy and Mark
Lucy and Mark have two children and had been claiming Child Benefit while they were married. Mark, the higher earner with an annual income of £60,000, was paying the HICBC, effectively repaying a portion of the Child Benefit through additional taxes. However, after their separation, Lucy became the primary caregiver and continued to claim Child Benefit, while Mark moved out.
Lucy earns significantly less than £50,000, so she is not subject to the HICBC. If Lucy did not notify HMRC of the change in circumstances, HMRC might continue to apply the HICBC to Mark’s income, leading to overpayments or potential issues later when reconciling taxes. By informing HMRC, Lucy and Mark can ensure the correct tax treatment and avoid unnecessary charges or repayments.
2.4 Maintenance Payments and Tax Implications
Following a separation or divorce, it’s common for one partner to pay maintenance (also known as alimony) to the other. In the UK, maintenance payments are generally not taxable, meaning the recipient does not have to pay tax on the money received, and the payer cannot claim a tax deduction for the payments made.
However, if maintenance payments are arranged through a court order, and the payer falls behind on payments, there could be legal consequences, and the payer’s financial situation may affect their overall tax situation. It is essential to ensure that any court-ordered financial settlements are reported to HMRC if they result in a change to income, particularly if they lead to a reduction in taxable income or increased outgoings for the payer.
Example 4: Claire and Andrew
Claire and Andrew have recently divorced, and Andrew is required by the court to pay monthly maintenance to Claire. While these payments are not subject to tax, Andrew’s overall financial situation has changed due to his new financial obligation. His income has effectively reduced, which may result in changes to his tax code or his eligibility for certain allowances or credits.
If Andrew fails to inform HMRC of his new financial situation, his tax code may not reflect his reduced disposable income, leading to an incorrect assessment of his tax liability. By updating HMRC about his changed financial circumstances, Andrew can ensure that his tax obligations are accurately calculated.
2.5 The Importance of Timely Updates to HMRC
One of the most common mistakes people make after divorce or separation is failing to update HMRC in a timely manner. Whether it’s forgetting to cancel a claim for Marriage Allowance, not adjusting Child Benefit payments, or misunderstanding how asset transfers are taxed, these oversights can result in financial penalties or unexpected tax bills.
HMRC has made it relatively simple to update personal details online, and it’s essential to take advantage of this to avoid any complications. Whether you’re filing a Self Assessment return or using the PAYE system, your tax situation will be more accurate if you keep your records up to date.
Example 5: Jane and David
Jane and David divorced in 2023, but neither of them informed HMRC of their change in marital status. A year later, Jane realised she had continued to benefit from the Marriage Allowance despite being ineligible after the divorce. Upon filing her tax return, she was notified by HMRC that she owed several hundred pounds in underpaid tax, along with interest. By failing to update HMRC immediately after the divorce, Jane ended up with a tax bill she wasn’t expecting.
2.6 How to Inform HMRC of Divorce or Separation
Like with marriage, informing HMRC of a divorce or separation can be done through a few different methods:
Online via your personal tax account: You can log in to your personal tax account and update your details, removing your spouse or civil partner from your records.
Through Self Assessment: If you file a Self Assessment tax return, make sure to indicate your updated marital status when filing.
By phone or post: You can contact HMRC by phone or write to them with the relevant details. This method is often slower but may be necessary if you don’t use the online system.
Remember to have your National Insurance number and any relevant court orders or documentation on hand when making these updates.
Tax Credits and Benefits Affected by Changes in Marital Status
Changes in marital status, whether through marriage, civil partnership, divorce, or separation, have significant implications for various tax credits and benefits in the UK. These changes can affect your eligibility for financial support, the amount of benefits you receive, or whether you need to repay benefits that you’re no longer entitled to. Understanding how these changes impact tax credits and benefits is crucial to ensure you receive the correct payments and avoid potential penalties.
3.1 Impact on Child Tax Credit and Working Tax Credit
Child Tax Credit and Working Tax Credit are means-tested benefits provided by HMRC to help families with children or low-income individuals and families, respectively. Both of these tax credits are highly sensitive to changes in household income and circumstances, including marriage, civil partnership, divorce, or separation.
Child Tax Credit is designed to help with the costs of raising a child, and your eligibility depends on your income and household situation. On the other hand, Working Tax Credit supports individuals who work but have a low income, with the amount you receive based on factors like your working hours, income, and number of children.
When your marital status changes, your household income changes too, and HMRC needs to be informed so they can reassess your entitlement. Failing to notify HMRC about your new circumstances could result in overpayment or underpayment of tax credits.
Example 1: John and Rachel’s Marriage
John and Rachel were both single parents receiving Child Tax Credit and Working Tax Credit based on their individual incomes. In 2024, they got married and started living together. However, they did not inform HMRC of their new marital status. Because their combined income was higher than the individual thresholds for these benefits, they continued to receive tax credits they were no longer entitled to as a couple.
Eventually, HMRC discovered the change in their household situation when they filed their annual tax returns. John and Rachel were required to repay the overpaid tax credits and faced a significant financial strain as a result. If they had updated their marital status with HMRC immediately, the overpayment could have been avoided, and their tax credit amounts would have been adjusted correctly.
3.2 Impact on Universal Credit
Universal Credit is gradually replacing several older benefits, including Child Tax Credit and Working Tax Credit. Like these tax credits, Universal Credit is a means-tested benefit that considers your household income and circumstances. Any change in your marital status, whether through marriage or separation, will affect your Universal Credit payments.
When you marry or enter into a civil partnership, your combined household income will be assessed to determine your eligibility for Universal Credit. Similarly, if you divorce or separate, your claim will be reassessed based on your new, individual income.
It is crucial to report changes to your relationship status as soon as they happen because Universal Credit payments are adjusted monthly, and any delay in reporting could lead to overpayment or underpayment.
Example 2: Emma and Steve’s Separation
Emma and Steve were a couple with two children, and they were jointly claiming Universal Credit. In 2024, they decided to separate. However, they continued to live together temporarily while making living arrangements, and they did not inform HMRC of their separation immediately.
Although their separation would have reduced their joint Universal Credit payments (since Emma’s income was lower and she would have become eligible for higher payments as a single parent), HMRC continued to assess their claim based on their previous joint income. When they finally reported their separation, HMRC adjusted their payments, but Emma had missed out on several months of higher benefits due to the delay in updating their details.
This example illustrates the importance of promptly reporting changes to your marital status to ensure that you receive the correct amount of Universal Credit. If you don’t inform HMRC, you could miss out on essential financial support or, conversely, face overpayments that will need to be repaid later.
3.3 The High-Income Child Benefit Charge (HICBC) and Child Benefit
Child Benefit is a financial benefit designed to help with the costs of raising children. It is available to all parents or guardians, regardless of income, but the High-Income Child Benefit Charge (HICBC) applies if either parent or guardian earns over £50,000. The HICBC effectively claws back some or all of the Child Benefit received by higher earners, depending on how much they earn above this threshold.
Changes to your marital status can have a significant impact on Child Benefit and the HICBC. If you were previously married or in a civil partnership and shared responsibility for children, a change in your relationship could alter who claims Child Benefit and who is responsible for paying the HICBC.
Example 3: Katie and Daniel’s Divorce
Katie and Daniel have two children and were claiming Child Benefit while they were married. Daniel was the higher earner, with an annual income of £55,000, so he paid the HICBC to reduce the Child Benefit received. After their divorce, Katie became the primary caregiver for the children, and Daniel moved out. Katie’s income was below £50,000, so she no longer needed to pay the HICBC.
However, because they didn’t inform HMRC of their divorce immediately, HMRC continued to assess Daniel’s income for the HICBC. This resulted in unnecessary Child Benefit repayments from Daniel. Once HMRC was notified, Daniel no longer had to pay the HICBC, and Katie received the full Child Benefit without any deductions.
This example shows how important it is to update your relationship status with HMRC to ensure that Child Benefit and HICBC are calculated correctly. Failing to do so could result in incorrect payments and unnecessary repayments.
3.4 Marriage and Civil Partnership: Claiming Tax Credits as a Couple
When you get married or enter a civil partnership, you are generally expected to claim tax credits and benefits as a couple. This means your household income is considered as a whole, and your eligibility for tax credits like Working Tax Credit or Child Tax Credit is based on your combined earnings.
Example 4: Sarah and Liam’s Civil Partnership
Sarah and Liam entered a civil partnership in 2024. Prior to this, Sarah had been claiming Child Tax Credit as a single parent based on her individual income. Liam, who earned more, had not been claiming any benefits. After their civil partnership, they needed to update HMRC to inform them of their new household situation.
By updating HMRC, Sarah’s Child Tax Credit was recalculated based on their combined income. As a result, the amount of tax credit they received was reduced because Liam’s income pushed their household above the threshold for maximum support. If Sarah had failed to inform HMRC of her new civil partnership, she would have continued to receive an incorrect amount of Child Tax Credit, which would eventually need to be repaid.
3.5 Impact of Remarriage on Previous Benefits
Another important consideration is how remarriage or entering into a new civil partnership affects any benefits or allowances that were linked to your previous relationship. For example, if you were receiving bereavement benefits following the death of a previous spouse or civil partner, your entitlement to these benefits may end when you remarry or form a new civil partnership.
Example 5: Helen’s Remarriage and Bereavement Support
Helen’s husband passed away, and she received Bereavement Support Payments for several years following his death. In 2024, Helen remarried. As a result, she was no longer eligible to receive bereavement payments, as her entitlement to these benefits ended upon remarriage. Helen informed HMRC of her new marriage, and her benefits were stopped. If she had failed to report her remarriage, she would have continued receiving payments she was no longer entitled to, leading to potential overpayments that HMRC would require her to repay.
This example highlights the importance of understanding how remarriage or new civil partnerships can affect previous benefits. Always inform HMRC of these changes to avoid any financial complications.
3.6 What Happens if You Fail to Update Your Status?
Failing to update your marital status with HMRC can lead to several financial and legal issues. In addition to overpayments or underpayments of tax credits and benefits, you may face penalties for not reporting changes in your circumstances. HMRC has the right to reclaim overpaid benefits and may charge interest on amounts that were incorrectly paid out.
Furthermore, if HMRC suspects that you deliberately failed to report changes to your marital status to claim benefits or allowances you were not entitled to, they may investigate your claim for fraudulent activity. While most cases are due to honest mistakes or delays, it’s essential to report changes promptly to avoid any accusations of wrongdoing.
Example 6: Mike’s Delayed Report of His Marriage
Mike got married in 2022 but delayed informing HMRC because he didn’t think it would affect his benefits. He continued to claim tax credits and other benefits based on his single status. In 2024, HMRC discovered the discrepancy, and Mike was required to repay the overpaid benefits, along with a fine for not updating his marital status. If Mike had informed HMRC right after his marriage, he could have avoided this financial burden.
Managing Tax Affairs After the Death of a Spouse or Civil Partner
The death of a spouse or civil partner is an emotionally challenging time, and on top of the personal loss, there are numerous financial and tax considerations to address. One of the most critical tasks is informing HMRC about the death to ensure that your tax affairs are correctly managed. This is particularly important because your tax situation may change significantly after the death of your partner, and failing to notify HMRC could lead to unnecessary financial complications.
Properly handling tax matters following the death of a spouse or civil partner ensures that your tax code is updated, any joint claims for benefits or tax credits are ended, and any entitlements, such as bereavement benefits, are claimed. This part explores how to manage taxes after the death of a partner and includes real-life examples to clarify the process.
4.1 Reporting the Death to HMRC
When a spouse or civil partner passes away, it’s essential to inform HMRC as soon as possible. HMRC needs to update their records and adjust your tax code to reflect your new circumstances. You can report the death online, by phone, or by post. You will need the deceased’s National Insurance number and any other relevant details, such as the date of death and your personal information, to complete the process.
Once HMRC is notified, they will review the deceased’s tax records to determine if any tax is owed or if a tax refund is due. If the deceased was paying tax through PAYE or Self Assessment, HMRC will issue a final tax calculation and settle any outstanding tax obligations or refunds.
Example: Helen and Paul’s Situation
Helen and Paul had been married for 25 years when Paul passed away in 2024. Paul was employed and paid tax through PAYE, while Helen received a small pension. After Paul’s death, Helen informed HMRC through the government’s “Tell Us Once” service, which notifies multiple government agencies, including HMRC. After reviewing Paul’s tax records, HMRC found that he had overpaid tax due to a change in his income just before his death, so a tax refund was issued to Helen as his next of kin.
In this case, timely notification to HMRC ensured that Paul’s tax affairs were settled quickly, and Helen received a tax refund that was due to her late husband. Failure to inform HMRC could have delayed the refund and complicated the process.
4.2 Changes to Your Tax Code After a Partner’s Death
When your spouse or civil partner passes away, your own tax situation may change. If you were previously claiming Marriage Allowance, this will no longer be applicable, and your tax code will need to be updated. HMRC will automatically adjust your tax code to reflect that you are now a single taxpayer, ensuring that you are no longer transferring any part of your personal allowance to your deceased partner.
Additionally, if your household income has changed as a result of your partner’s death, this may affect your tax band. For example, if your spouse was the primary earner, their death might lower the household income, placing you in a lower tax bracket.
Example: John’s Tax Code Update
John and his wife Sarah had been married for 30 years. Sarah passed away in 2023, and they had been claiming Marriage Allowance, which allowed John to transfer part of Sarah’s unused personal allowance to himself. After Sarah’s death, John informed HMRC, and his tax code was updated to reflect that he was no longer eligible for the Marriage Allowance. This adjustment ensured that John’s future tax payments were correct and avoided any potential overpayment of tax.
4.3 Inheritance Tax and Passing on Assets
In addition to updating your income tax details, one of the most significant tax considerations after the death of a spouse or civil partner is Inheritance Tax (IHT). In the UK, Inheritance Tax is payable on the estate of a person who has passed away, but there are specific rules that apply to spouses and civil partners.
When one partner in a marriage or civil partnership dies, the surviving partner can usually inherit the estate without paying any Inheritance Tax, provided they are both UK residents. This includes property, savings, and other assets. Additionally, the unused portion of the deceased partner’s nil-rate band (the threshold before IHT is applied) can be transferred to the surviving partner, effectively doubling the amount of their estate that can be passed on tax-free.
For the 2024/25 tax year, the individual IHT nil-rate band is £325,000. When combined with the deceased spouse’s unused band, the total tax-free threshold for the surviving spouse can be up to £650,000.
Example: Jenny and David’s Inheritance
Jenny and David were married for 40 years, and when David passed away in 2024, his estate, worth £450,000, was left to Jenny. Because they were married, no Inheritance Tax was payable on the transfer of assets to Jenny. Furthermore, David had not used any of his IHT nil-rate band, so Jenny now has an additional £325,000 added to her own nil-rate band, meaning her estate could be worth up to £650,000 before any Inheritance Tax would be due upon her death.
This example demonstrates the financial benefit of transferring unused IHT allowances between spouses, which is one of the reasons why it is so important to keep HMRC informed of changes in your marital status.
4.4 Bereavement Support Payments
The UK government provides Bereavement Support Payments to help people who have lost their spouse or civil partner. This benefit is available to those who were married or in a civil partnership at the time of their partner’s death. It is a tax-free, non-means-tested benefit designed to provide financial support during the difficult period following a partner’s death.
Bereavement Support Payments are available in two parts:
A lump sum payment of £2,500 (or £3,500 if you have children).
Monthly payments of £100 for up to 18 months (or £350 if you have children).
These payments are tax-free and do not count towards your taxable income, but you must inform HMRC if you receive them so that your overall financial situation can be accurately assessed.
Example: Anna’s Bereavement Support
Anna’s husband, Tom, passed away in 2024, leaving Anna to care for their two children. Anna applied for Bereavement Support Payments and received a lump sum of £3,500, followed by monthly payments of £350. These payments provided essential financial support during the difficult time following Tom’s death. Because the payments were tax-free, they did not affect Anna’s tax liability or her entitlement to other benefits. However, Anna informed HMRC of her new situation to ensure her tax records were correct.
4.5 Joint Accounts, Savings, and Investments
Another important aspect of managing tax after a spouse’s death is handling joint accounts, savings, and investments. If you had joint bank accounts, savings, or investments with your spouse, these assets typically pass to you automatically upon their death. However, you must still inform HMRC so that these assets are correctly recorded in your tax records.
In some cases, the deceased may have held savings or investments in their name only. These assets will form part of their estate and may be subject to Inheritance Tax if the total value of the estate exceeds the nil-rate band.
Example: Richard and Jane’s Joint Savings
Richard and Jane had a joint savings account with £100,000. When Jane passed away in 2024, the full amount automatically transferred to Richard, as he was the surviving account holder. Richard informed HMRC of Jane’s death, and the savings were not subject to Inheritance Tax because joint assets between spouses are exempt. However, if Jane had held these savings in her name alone, they would have been part of her estate, potentially increasing the total estate value and triggering an IHT charge.
4.6 Dealing with Capital Gains Tax After a Partner’s Death
In the UK, Capital Gains Tax (CGT) is usually not payable on assets transferred between spouses during their lifetime or upon the death of one spouse. However, if the surviving partner sells any inherited assets at a later date, they may be liable to pay CGT on the increase in value from the date of inheritance to the date of sale.
If you inherit property, shares, or other assets from your spouse, it’s essential to keep a record of their value at the time of death. This will help you calculate any potential CGT liability if you decide to sell the assets in the future.
Example: Mary’s Inherited Property
When Mary’s husband passed away, she inherited a property they had purchased together. The property was worth £300,000 at the time of his death, and Mary decided to sell it five years later for £400,000. Because Mary inherited the property, she is only liable to pay CGT on the £100,000 increase in value, not on the total sale price. By informing HMRC and maintaining accurate records, Mary ensures she pays the correct amount of tax on the sale.
How "My Tax Accountant" Can Help You Manage Your Tax Obligations After a Change in Marital Status
Navigating the complexities of the UK tax system after a major life event such as marriage, civil partnership, divorce, separation, or the death of a spouse can be challenging. In such times, many people turn to professional tax advisers or accountants to ensure that their financial affairs are handled correctly. One service that can provide invaluable support is My Tax Accountant, a trusted resource for managing tax issues across a wide range of circumstances, including those related to changes in marital status.
5.1 Expert Assistance with HMRC Notifications
One of the most immediate concerns when your marital status changes is notifying HMRC to avoid any discrepancies in your tax records. Whether you’ve recently gotten married, entered a civil partnership, divorced, or lost a spouse, My Tax Accountant can handle all the necessary communications with HMRC on your behalf.
Tax experts at My Tax Accountant are well-versed in:
Updating your tax code to reflect your new circumstances.
Managing your Marriage Allowance claims, whether you are applying for the first time or ending a claim after divorce.
Ensuring your tax records are updated promptly to avoid penalties, overpayments, or underpayments.
By engaging professional help, you can avoid potential issues that arise from missed deadlines or incomplete information, as My Tax Accountant will ensure that everything is reported accurately and on time.
Example: Handling a Divorce
After going through a divorce, Jane felt overwhelmed by the task of updating her tax information and managing her finances. She hired My Tax Accountant to handle the administrative tasks of notifying HMRC, removing her from the Marriage Allowance scheme, and ensuring her new tax code reflected her updated circumstances. As a result, Jane avoided overpaying taxes and any potential penalties for late notification.
5.2 Maximising Tax Benefits and Allowances
With My Tax Accountant, you can be assured that all potential tax benefits and allowances are correctly claimed. In the case of marriage or civil partnership, this means ensuring you are fully taking advantage of the Marriage Allowance, which allows one partner to transfer a portion of their personal allowance to the other if certain criteria are met.
My Tax Accountant will:
Evaluate your eligibility for the Marriage Allowance and help you apply for it.
Calculate any backdated claims to ensure you receive any refunds owed to you for previous tax years.
Advise on how changes in your relationship status impact other tax-related benefits like the High-Income Child Benefit Charge (HICBC).
In cases where a separation or divorce occurs, My Tax Accountant can ensure that any benefits or allowances that are no longer applicable are cancelled to avoid future issues, like repaying benefits that were received in error.
Example: Claiming Marriage Allowance
Tom and Sarah were recently married and heard about the potential tax savings from the Marriage Allowance. Unsure how to apply, they approached My Tax Accountant. The tax advisers quickly assessed their situation, found that Tom could transfer £1,260 of his personal allowance to Sarah, and helped them claim a tax rebate of over £500 for the past tax year. Without professional help, Tom and Sarah might not have realised they were eligible to claim retroactively.
5.3 Managing Complex Tax Issues After the Death of a Spouse
The death of a spouse or civil partner often brings a host of complex financial matters to deal with, including inheritance, tax liabilities, and changes in income. My Tax Accountant offers compassionate, expert assistance to help you manage your tax obligations during this difficult time.
My Tax Accountant can assist in:
Calculating and managing Inheritance Tax (IHT) on your partner’s estate. This includes assessing whether the deceased’s nil-rate band can be transferred to you, increasing your IHT threshold.
Ensuring that any Bereavement Support Payments you receive are reported correctly to avoid future issues.
Advising on joint accounts, savings, and investments that are transferred to you, ensuring that they are properly reflected in your tax records to avoid any future Capital Gains Tax (CGT) surprises.
Helping you navigate through the final tax affairs of your late spouse, including closing their PAYE records or filing their final Self Assessment tax return.
Example: Handling Inheritance Tax
When David passed away, he left a property worth £500,000 to his wife, Laura. Laura was unsure about how much of the estate would be liable for Inheritance Tax. My Tax Accountant reviewed the estate and found that because David’s nil-rate band was unused, Laura could benefit from an additional £325,000 of IHT-free estate transfer. As a result, no Inheritance Tax was payable, and My Tax Accountant handled all of the paperwork to ensure that HMRC was notified and that Laura received the correct tax treatment on her inheritance.
5.4 Support with Self Assessment and PAYE
Changes in marital status often affect whether you need to file a Self Assessment tax return or make adjustments to your PAYE tax code. My Tax Accountant can provide expert guidance on both systems.
For those already registered for Self Assessment, My Tax Accountant can:
Ensure that your marital status is correctly updated on your tax return.
Advise on any changes to your tax liability due to Marriage Allowance claims, asset transfers, or inheritance.
Handle any complex calculations, such as dividing assets during a divorce or determining Capital Gains Tax on the sale of inherited property.
For PAYE taxpayers, My Tax Accountant can:
Work with your employer and HMRC to ensure that your tax code is correctly adjusted after a life event.
Ensure that any backdated adjustments are applied to avoid overpaying or underpaying taxes during the transition period.
Example: PAYE Adjustment After Marriage
After getting married in 2024, Emma noticed that her tax code still reflected her previous single status, meaning she was missing out on Marriage Allowance. She contacted My Tax Accountant, who liaised with her employer and HMRC to ensure that her tax code was adjusted immediately. By the next tax year, Emma received a refund for the overpaid tax, thanks to the quick action of her accountant.
5.5 Avoiding Penalties and Ensuring Compliance
One of the major benefits of working with My Tax Accountant is avoiding penalties for non-compliance. HMRC can impose fines and interest charges on late or incorrect filings, especially when it comes to changes in marital status that affect your tax liabilities.
By ensuring that your records are kept up to date, My Tax Accountant helps you stay compliant with tax laws, avoiding the risk of:
Overpayments or underpayments of tax due to outdated information.
Fines and interest charges for failing to report changes in your relationship status.
Complicated appeals or disputes with HMRC over incorrectly claimed allowances or benefits.
Example: Avoiding a Marriage Allowance Repayment
Daniel and Lisa separated but did not inform HMRC right away. This led to Daniel continuing to benefit from Marriage Allowance for several months. Worried about the consequences, they turned to My Tax Accountant, who helped them report the change to HMRC and cancel the allowance. By addressing the issue promptly, they avoided a large repayment and fines, which could have been issued if the error had gone unnoticed.
5.6 Personalised Tax Advice for Future Planning
In addition to handling immediate tax concerns, My Tax Accountant provides forward-looking advice to help you plan your finances after a significant life event. Whether you are newly married and looking to optimise your tax situation, or have recently divorced and need to adjust your financial plans, My Tax Accountant offers personalised advice tailored to your needs.
By understanding the intricacies of the UK tax system, they can help you:
Maximise your allowances and deductions to reduce your tax liability.
Plan for future tax obligations, such as CGT on inherited or jointly owned assets.
Ensure that any future life events are anticipated in your tax strategy, reducing the risk of unexpected tax bills.
Example: Long-Term Tax Planning After a Divorce
After finalising her divorce, Maria approached My Tax Accountant for advice on her future financial planning. She had received a large cash settlement and several investment properties as part of the divorce settlement. The tax advisers helped Maria plan for future Capital Gains Tax on the sale of these assets, ensuring she understood how her new income sources would affect her tax obligations. This forward-thinking approach helped Maria avoid any tax surprises down the line.
My Tax Accountant offers expert support tailored to individuals going through life’s major transitions. Whether you are navigating a change in your marital status, managing complex inheritance issues, or simply looking for proactive tax advice, the team at My Tax Accountant can help you manage your financial affairs efficiently and ensure you comply with all HMRC requirements. This allows you to focus on what matters most, knowing that your tax affairs are in capable hands.
FAQs
Q: Is it mandatory to inform HMRC when you get married?
A: Yes, informing HMRC when you get married is mandatory to ensure your tax records are accurate and to prevent any overpayments or underpayments of tax.
Q: Can you notify HMRC about your marriage online?
A: Yes, you can notify HMRC about your marriage through your personal tax account on the GOV.UK website.
Q: Does getting married affect your tax code?
A: Yes, getting married can affect your tax code, especially if you are eligible for the Marriage Allowance or if your circumstances change.
Q: How soon should you inform HMRC after getting married?
A: You should inform HMRC as soon as possible after getting married to ensure that your tax records are updated promptly.
Q: Can your spouse’s income affect your tax payments after marriage?
A: Yes, your combined household income after marriage can affect your tax liabilities, particularly with regard to benefits or tax credits.
Q: What happens if you don’t tell HMRC about your marriage?
A: If you don’t inform HMRC about your marriage, your tax code might not be accurate, leading to potential overpayment or underpayment of tax.
Q: Can you backdate changes to your marital status for tax purposes?
A: Yes, HMRC allows you to backdate changes to your marital status for certain tax benefits like Marriage Allowance, up to four years in most cases.
Q: Does getting married affect National Insurance contributions?
A: No, getting married does not directly affect your National Insurance contributions, but it may impact other tax-related factors.
Q: Will your spouse’s tax debts affect your own tax obligations?
A: No, your spouse’s tax debts do not automatically affect your own tax obligations, but you should ensure that joint financial arrangements are managed properly.
Q: Does getting married affect your student loan repayments?
A: No, marriage does not directly affect student loan repayments, as they are calculated based on your individual income, not your household income.
Q: Can you still claim Marriage Allowance if one spouse is self-employed?
A: Yes, you can claim Marriage Allowance if one spouse is self-employed, as long as the basic eligibility criteria are met.
Q: Can you update HMRC about your marriage through Self Assessment?
A: Yes, you can update HMRC about your marriage through your Self Assessment tax return if you are required to submit one.
Q: Does getting married affect Capital Gains Tax?
A: Yes, assets transferred between spouses are generally exempt from Capital Gains Tax, making it beneficial to update HMRC about your marriage.
Q: Does HMRC need to be informed if you form a civil partnership?
A: Yes, you must inform HMRC if you form a civil partnership, as it carries the same tax implications as marriage.
Q: Can your tax credits change when you get married?
A: Yes, tax credits are recalculated based on your new household income when you get married, so you must inform HMRC of your new status.
Q: How does marriage affect your pension contributions?
A: Marriage does not directly affect your pension contributions, but it can impact your tax reliefs or benefits depending on your income levels.
Q: Do you need to provide your marriage certificate to HMRC?
A: HMRC typically does not require your marriage certificate for tax purposes, but you should have it available in case additional documentation is requested.
Q: Can you receive tax refunds after getting married?
A: Yes, you may be entitled to tax refunds if your tax code is adjusted after marriage and it results in overpayment of taxes.
Q: Does marriage affect your entitlement to Child Benefit?
A: Marriage itself does not affect Child Benefit entitlement, but changes in household income after marriage might impact your eligibility for certain benefits.
Q: Can marriage affect your eligibility for Universal Credit?
A: Yes, your eligibility for Universal Credit is based on household income, so marriage could change the amount you receive.
Q: Can you apply for Marriage Allowance if you live abroad?
A: Yes, UK nationals living abroad may be eligible for Marriage Allowance as long as one partner remains a UK taxpayer and meets the criteria.
Q: What happens to your Marriage Allowance if your spouse passes away?
A: If your spouse passes away, the Marriage Allowance claim will end, and your tax code will need to be updated accordingly.
Q: Can you transfer unused tax allowances between spouses when one is a higher-rate taxpayer?A: No, Marriage Allowance is only available when the higher-earning spouse pays tax at the basic rate. Higher-rate taxpayers are not eligible.
Q: Does getting married affect your council tax?
A: Getting married does not directly affect council tax, but any single person’s discount you previously received will end.
Q: Do you need to inform HMRC if you get married abroad?
A: Yes, if you are a UK taxpayer and get married abroad, you still need to inform HMRC about your change in marital status.
Q: Can marriage affect your entitlement to bereavement benefits?
A: Yes, remarriage or entering a new civil partnership can affect your entitlement to bereavement benefits, which may be stopped.
Q: Can you claim Marriage Allowance for previous tax years?
A: Yes, you can claim Marriage Allowance for the current tax year and up to four previous tax years, subject to eligibility.
Q: Does marriage affect your entitlement to housing benefits?
A: Yes, your entitlement to housing benefits may change based on your new household income after marriage.
Q: Do both spouses need to be UK residents to claim Marriage Allowance?
A: No, only one spouse needs to be a UK taxpayer to claim Marriage Allowance, even if the other spouse lives abroad.
Q: Does marriage affect inheritance tax allowances?
A: Yes, spouses can transfer their unused inheritance tax allowances to each other, effectively doubling the tax-free threshold.
Q: Can your spouse inherit your tax-free savings allowance?
A: Yes, your spouse can inherit your ISA savings tax-free upon your death, but you should inform HMRC to facilitate this transfer.
Q: Can your tax band change after getting married?
A: Your tax band can change if your combined household income changes significantly after getting married.
Q: Does HMRC need to be informed of a prenuptial agreement?
A: HMRC does not need to be informed of a prenuptial agreement, as it does not directly affect tax records unless it impacts asset ownership.
Q: Can a spouse who doesn’t work still claim Marriage Allowance?
A: Yes, a non-working spouse can still claim Marriage Allowance if the other spouse is a basic-rate taxpayer.
Q: Does marriage impact your student finance repayments in the UK?
A: No, student finance repayments are based on individual income and are not affected by your marriage.
Q: Can same-sex couples claim Marriage Allowance?
A: Yes, same-sex couples in marriages or civil partnerships are eligible to claim Marriage Allowance if they meet the criteria.
Q: Does HMRC need to be informed of a change in civil partnership status?
A: Yes, HMRC must be informed if your civil partnership ends, as it affects your tax code and allowances.
Q: Does HMRC offer tax relief for wedding expenses?
A: No, HMRC does not offer tax relief for wedding expenses, but you should still report your new marital status for tax purposes.
Q: Can you combine your personal savings allowance with your spouse’s?
A: No, personal savings allowances cannot be combined, but spouses can inherit certain tax benefits upon death.
Q: Can non-UK citizens claim Marriage Allowance if married to a UK taxpayer?
A: Yes, non-UK citizens can claim Marriage Allowance if their spouse is a UK taxpayer and they meet the eligibility criteria.
Disclaimer:
The information provided in our articles is for general informational purposes only and is not intended as professional advice. While we strive to keep the information up-to-date and correct, My Tax Accountant makes no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the website or the information, products, services, or related graphics contained in the articles for any purpose. Any reliance you place on such information is therefore strictly at your own risk.
We encourage all readers to consult with a qualified professional before making any decisions based on the information provided. The tax and accounting rules in the UK are subject to change and can vary depending on individual circumstances. Therefore, My Tax Accountant cannot be held liable for any errors, omissions, or inaccuracies published. The firm is not responsible for any losses, injuries, or damages arising from the display or use of this information.
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