Why getting married could have more financial benefits than you think
Whether you're already married, engaged, or dreaming of your perfect 'big day', there's more to getting hitched than just love.
Granted, the latter is typically the main reason people tie the knot: to show their commitment to one another. But aside from the lovey-dovey stuff, there are also some financial benefits to the act.
'Romance can cost a fortune, but marriage can pay,' says Sarah Coles, head of personal finance at Hargreaves Lansdown. 'If you end up tying the knot or entering into a civil partnership, there are lots of financial rules you can take advantage of, and save a fortune.'
Here are some of the reasons why getting down on one knee might be good for your wallet (once you've paid off the wedding costs).
'All that I have I share with you' means different things to different couples, but sharing your tax allowance has a lot more benefits than sharing a toothbrush.
The Marriage Allowance (which can also be used by those in civil partnerships) allows a spouse who isn't using all of their Personal Allowance to allocate 10% of it to their husband or wife.
This is the amount that everyone is entitled to earn without paying any tax. The standard Personal Allowance is £12,570.
Are you a high earner? The allowance decreases by £1 for every £2 you earn above £100,000.
This means if you earn above £125,140, you won't have a Personal Allowance.
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Only couples where the higher earner takes home under £50,270, and so pays basic rate tax, are eligible.
If you are in this position, the Marriage Allowance can save you £252 a year. You can backdate this too, all the way back to 2021 if you have been in this position since then. If you think you might be entitled to Marriage Allowance, use the government's calculator to check and contact the taxman yourself to apply.
Married couples and those in civil partnerships are able to pass assets between them without HMRC deciding that there is a tax bill to pay. This can ensure that you use both of your personal allowances for income and capital gains tax to pay as little as possible.
Coles explains that, as well as the Personal Allowance that means you don't pay tax on the first slice of income, you also have a Personal Savings Allowance, Dividend Allowance and Capital Gains Tax allowance, which means you don't pay tax on the first slice of savings interest, dividend payments or profit from selling investments.
'You can share your investments and savings between you, so you both take full advantage of all these allowances. Any extra can be held by the lowest taxpayer, so you pay the absolute minimum in tax,' she says.
'If an unmarried couple tried to do this, passing ownership to their partner could actually trigger a tax bill.'
Unromantic as this might seem during the early stage of a relationship, the marriage vows we make are 'until death us do part', and some of the biggest financial perks of married life aren't felt by us, but by our descendants, who may benefit from a lower inheritance tax bill if their parents are married.
This is because married couples, and those in civil partnerships, can leave unlimited wealth to their spouse or civil partner without triggering an inheritance tax bill. Your spouse can also inherit your unused £325,000 tax-free allowance and £175,000 'residence nil rate band' (also known as the 'main residence' band) to allow them to pass on more wealth tax-free when they die.
Inheritance tax is levied at a hefty 40% on anything above the £325,000, so it can cut into your legacy for your children considerably. Sean McCann, chartered financial planner at NFU Mutual, also points out that, because the tax has to be paid within six months of the death and before the assets can be passed to the beneficiaries, it can leave an unmarried but bereaved member of a couple in a difficult situation.
'For cohabiting couples, if your partner leaves you chargeable assets valued at more than £325,000, you will pay 40% in tax on the excess,' he says. 'This often leaves the surviving partner having to deal with a large, unexpected tax bill, when they are at their most vulnerable.'
Jason Hollands, managing director at investment group Tilney Bestinvest, adds that if you make gifts to your spouse or civil partner during your lifetime, they don't count within the seven-year rule for inheritance tax purposes.
'Where an individual makes a gift of capital or assets to another individual during their lifetime – perhaps a car or high value piece of jewellry – it may be classed as a Potentially Exempt Transfer and, should death occur within seven years from the date of the gift, the beneficiary may be liable to inheritance tax, a nasty surprise if they don't have the resources to pay. However, gifts between spouses or civil partners are not Potentially Exempt Transfers. They're ignored for inheritance tax purposes altogether.'
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