You meet someone, fall in love, and hearts pop out of the sky when you look at them. They’re the person you want to spend the rest of your life with. But is there any point in actually being married?
Marriage, and these days civil partnerships too, still count in many UK laws and rules. People talk about couples who live together and are unmarried as ‘common law partners’ – yet that’s just a phrase – it doesn’t usually give you rights.
The Royal Wedding has heightened conversations about the institution of marriage, so I thought it worth explaining what difference it makes to your finances too. Here’s my list of the top five financial rights of marriage – including civil partnerships – over just co-habiting. You’ll note, many of them involve death!
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You can get a free £900 tax break if you’re married. This is deliberate government social engineering to reward marriage through the tax system. It was launched three years ago and applies where one is a basic 20% rate taxpayer and the other a non-taxpayer.
The non-taxpayer can apply to have 10% (£1,190) of their tax-free allowance shifted to the taxpayer. This means £1,190 of income they were taxed on at 20% is now tax-free – a £238 gain this year done via altering your tax code.
If eligible you can back claim to when it started too, so that’s a cheque for £662 – making a total of £900. It takes five minutes to do at www.gov.uk/marriage-allowance – it’s the non-taxpayer who must apply. If you have any questions read my guide at www.mse.me/marriagetax for further help and advice.
- Your spouse won’t pay inheritance tax. When you die, any money, property or assets left to your spouse is automatically exempt from inheritance tax.
- Unused inheritance tax allowances can be transferred. There’s no inheritance tax to pay on the first £325,000 of anyone’s estate. Tax is only paid above that. If any of this is unused when your spouse dies, then the remainder can be passed across to you. The same also applies to any unused portion of the £125,000 property allowance (which reduces tax left to children on sale of a house).
- You can inherit your spouse’s ISA allowance. While savings and investments kept inside tax-free ISAs are liable for inheritance tax, the ISA allowance itself can be passed on to a spouse. So if they’ve £30,000 in ISAs you get this on top of your own ISAs.
- You can boost your savings interest or capital gains allowance. Savings and investments can be freely moved between spouses – without any risk of later inheritance tax, or capital gains tax.
Of course these days with the personal savings allowance letting basic-rate taxpayers earn up to £1,000 interest a year without tax, most people don’t pay tax on their savings any more. Yet if you do, then moving savings to use up the other’s allowance, or to the one with the lower tax rate, makes sense.
Plus if you’re selling something (like shares) which will attract capital gains tax, you get an annual allowance of £11,700 profit tax-free. If you’ll go over this, you can pass some of the asset to your spouse first, to use up both your allowances.
Martin Lewis Money Advice @martinlewis
Martin Lewis is the Founder and Chair of MoneySavingExpert.com. To join the 13 million people who get his free Money Tips weekly email, go to www.moneysavingexpert.com/latesttip