My son, who lives and works in the United Kingdom, got married last year to an Irish girl who also lives and works in the UK. They came home to Ireland to get married and returned to the UK afterwards.
Do newlyweds have any tax liability for cash wedding presents received from wedding guests? Secondly, do newlyweds have any tax liability where the parents pay for or contribute to the cost of the wedding?
Lastly, do such parental contributions have any implications for the inheritance thresholds – ie do any such wedding contributions reduce the tax-free thresholds available?
My son and his wife are preparing their UK tax returns for 2019 (the year they got married) and are unsure as to whether they should include such cash wedding gifts and/or the parental contributions as income.
Mr DL, email
It always seems a shame to have to be weighing up things like tax liabilities when you are talking about an occasion like a wedding. But such is the focus these days of making sure you stay on the right side of the tax authorities – and the knowledge of the increasing amount of information they have available about your financial arrangements, that people do fret.
And, of course, the rules are different depending on the country you’re talking about.
In Ireland, for instance, Revenue tightened the rules a few years ago as they became aware of that it was becoming disconcertingly common for well-off parents to effectively finance the lifestyles of their adult children.
However, even now, there is no Revenue bar – or tax charge – on money contributed by parents to pay for a wedding in full or in part.
As your son and his daughter-in-law appear to be tax resident there, it is the UK rules that will apply
When it comes to presents, the rules are different. Revenue is happy that a present can be given up to the value of the small gift exemption – €3,000 – which is tax free in any case, wedding or no wedding. Of course, in those circumstances, you would not have been able to use the exemption to gift your son any other money in his wedding year.
Anything above that amount will impact on inheritance tax thresholds – although it will not result in an actual tax charge at that time unless significant inheritances or gifts have already been received.
In the UK, the rules and different. And as your son and his daughter-in-law appear to be tax resident there, it is the UK rules that will apply.
Exemption
Critically, there does not appear to be the same blanket exemption for wedding costs met by parents that exists in Ireland. There is an annual small gift exemption that allows a parent to contribute up to £3,000 without tax being an issue and there are also specific wedding gift thresholds. Anything not going to an actual gift could also be used to subvent the cost of the wedding free of tax.
Thereafter, a parent can give what they can afford without impacting their financial security – ie out of “excess income”. The catch here is that the parent funding the wedding needs to survive seven years or, under UK inheritance tax law, the sum becomes part of their estate for inheritance tax purposes.
The good news for you and your son? As you are based over here, where it is the beneficiary, not the departed, who faces inheritance tax, your son will not face any inheritance tax charge in either country on the back of the wedding costs.
In terms of gifts, it appears a child can receive a wedding gift form a parent of up to £5,000 in value without tax being an issue. From grandparents, the upper limit is £2,500 and from any other relative or friends, the limit is £1,000.
For most of us, those limits will be more than generous enough to accommodate wedding gifts.
The bottom line is that neither your son, or his wife, will face a tax charge on the cost of his Irish wedding, the support towards its costs from his parents, or the gifts he has received.
