Family weddings: The perfect moment to seek financial advice?

As lockdown restrictions ease and the countdown to bigger weddings begins, scores of couples will be keen to get their plans to walk down the aisle firmly back on track.

The cost of weddings is likely to soar, particularly as couples may choose to go for something more extravagant after being apart from friends and family for so long. But what is the optimum way you could gift money towards a couple’s wedding without jeopardising your own finances? We investigate.

Overview:

  • As COVID-19 restrictions are eased across the UK, demand for weddings is on the rise – and they’re likely to be bigger and more costly than ever.
  • If you’re considering gifting a couple money towards their wedding, first seek advice to be sure you understand any tax implications.
  • Specific wedding-gift allowances mean you can reduce a potential Inheritance Tax bill – or, if the wedding is some time in the future, you can save into an ISA on a regular basis.

The coronavirus restrictions of the past months have forced thousands of couples to cancel their big day until now – yet surviving lockdown together also seems to have galvanised many to making that lifelong commitment. In November, wedding-planning website Hitched revealed that some jewellery brands saw sales of engagement rings rise by 40% last year.1

These rescheduled weddings are now likely to be big. In 2019, Hitched reported that the average UK wedding costs couples and their families an astounding £31,974.2 That figure is set to rise over the next few years, too. Couples who were happy to keep things low key will likely have gone ahead and tied the knot during the pandemic, so those still patiently waiting for their big day are potentially going to want to party hard – they won’t be cutting back their guest list any more than necessary, plus wedding suppliers are going to be in big demand.

The wedding bill is going to put significant financial pressure on not only the couples, but also the family members who are likely to be supporting them.

While you might not deem your child or grandchild’s wedding to be a reason to seek financial advice, if you’re thinking of giving the happy couple a sum of money, it’s nevertheless worth consulting your adviser – purely to ensure you make your gift in the right way.

For instance, you might be aware that you’re allowed to give away some of your money every year to help reduce a potential Inheritance Tax bill, but did you know that there are specific allowances for wedding gifts?

Every year, you can give £5,000 to a child getting married, £2,500 to a grandchild or great-grandchild, or £1,000 to anyone else, and thereby reduce the taxable value of your estate.

It goes without saying that this won’t cover the cost of the wedding; however, it could reduce your tax bill later on, and your adviser can therefore ensure that everything is set up and recorded as necessary.

Also of note is that your adviser can make sure you withdraw money from the right pot. If you’re aged 55+ and still working, it might be all too tempting to dip into your pension – yet there’s a risk you could then end up with a large tax bill or unwittingly trigger the money purchase annual allowance (MPAA) – a detrimental piece of legislation that vastly reduces the amount of money you can pay into a pension once you’ve accessed it.

Your adviser can help you get an overall view of the situation and ensure you make the gift in the most tax-effective way possible, without endangering your own financial future in the process. Many clients also find it helpful talking to their adviser from the point of view of helping remove some of the emotion out of the decision-making.

If you’re planning for the future and wish to pay for all or part of a child’s wedding, you can also approach your adviser to discuss putting away money on a regular basis. A Stocks & Shares ISA – as long as you have some allowance you’re not using – can be a good starting point to grow a pot for your child. Your money will grow tax-efficiently within an ISA, and you also won’t have to pay any tax when you cash it in.

Junior ISA is, of course, available for younger children – but just be mindful that once they turn 18, they can spend the money as they choose to, and at that age they may not have entirely the same spending priorities as you!For more advice on the best way to help pay for a wedding, it’s the perfect moment to speak to a member of our Wellesley team for further advice.

Sources:

1 https://www.hitched.co.uk/wedding-planning/news/rise-in-proposals-covid/

2 Hitched, The National Wedding Survey 2019, based on a sample of 2,886 representative adults across the UK

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are dependent on individual circumstances.

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