Most couples don’t get married for the tax breaks, but there are some definite financial advantages to saying ‘I do’.
Marriage has become a bit of a political issue over the years with endless debates about whether successive governments are doing enough to encourage it. And while most couples have more romantic things than tax to consider when planning their life together, there are various financial and tax benefits for married couples that are worth knowing about.
Inheritance tax advantages if you’re married
Inheritance tax (IHT) used to be something that only the very wealthiest needed to worry about. However, decades of soaring house prices combined with frozen tax thresholds have changed all that.
In the current tax year (2024/25), you usually have to pay IHT (or rather, the person sorting out your affairs has to pay it out of your ‘estate’) if the property and investments etc that you leave add up to more than £325,000.
Inheritance tax is charged at a rate of 40% on everything you leave that’s worth more than £325,000, so it can add up to many thousands of pounds. There’s also a £175,000 ‘main residence’ allowance that applies in addition to the existing £325,000 nil rate band, but only where the person who has died is transferring a property that was once their home, to their direct descendants (for example their children or grandchildren).
The good news is that, if you’re married or in a civil partnership:
- You can leave everything to your husband or wife. If you’re married or in civil partnership, you can leave all your worldly goods to your spouse or civil partner when you die and your estate won’t have to pay a penny in inheritance tax.
- You can effectively double your inheritance tax allowance. Married couples and those in a civil partnership can transfer their unused inheritance tax allowance (sometimes called the ‘nil rate band’) to each other.
What that means is that if, for example, your husband died before you and he’d left everything he owned to you, he wouldn’t have used any of its inheritance tax allowance (because spouses can leave anything and everything to each other without paying IHT). When you die your executors can effectively claim your husband’s unused IHT allowance, so there are two lots of £325,000 that can be offset against the value of your estate.
Find out more about how inheritance tax works in our article What is Inheritance Tax?
Capital gains tax marriage benefits
Capital gains tax is a tax you pay on the profit you make when you sell assets such as shares, investments or a second property. You don’t have to pay CGT on every penny of profit as you’re given an annual allowance (which is £3,000 in the current 2024/25 tax year).
The good news is that if you’re married or in civil partnership, you can give anything you want to your spouse or civil partner and they won’t have to pay capital gains tax on it – no matter how valuable it is.
This tax concession means you can give away assets to minimise your tax bill. Do bear in mind that if you give away something to your spouse or civil partner, you can’t ask for it back! Learn more about CGT in our guide What is Capital Gains Tax and how do I pay it?
Pensions
If you are married or in a civil partnership, you may also get some benefits relating to any work pensions your spouse or partner has.
Most pension schemes will pay a percentage of the pension you have built up to your spouse or civil partner when you die. Anyone who is dependent on you financially (such as a child) would also be able to claim this pension.
Many couples think that partners have the same rights, but unfortunately that’s not always the case. It’s all down to the pension scheme’s own rules and – sometimes – how they’re interpreted. Find out more in our article What happens to my pension when I die?
If you want to be certain who your pension goes to upon death, you’ll need to complete a pension expression of wishes form. If you don’t have one, the trustees or providers have the right to choose who receives anything from the pension.
IHT changes that the Chancellor made at the Budget could prompt unmarried couples to reassess whether marriage or civil partnership may now be the right option, as from April 2027, pensions will be brought into the scope of inheritance tax for the first time.
Emma Sterland, chief financial planning director at wealth management firm Evelyn Partners, said; ‘It has, all other things being equal, strengthened the IHT case for getting married. This is because, as the policy stands and from that date, the spousal exemption from IHT will be pretty much the only way that pension assets outside the nil-rate bands can be protected from IHT with any certainty. Generally, all assets left to a spouse or civil partner are automatically exempt from IHT, and under the proposals as currently drafted, this will include those pension assets affected by the Budget change.
“Of course, the IHT problem might arise further down the line when the surviving spouse dies. While possibly benefitting from two sets of nil-rate bands, their remaining wealth could be inflated by the pension assets from the first death, potentially increasing IHT liability for their children or other beneficiaries – especially if they die soon after their spouse.
‘However, for those who are in a relationship but unmarried – whether co-habiting or not – the issue could arise on the first death, leading to potentially much greater IHT exposure than would currently be the case. It is likely that some older couples in long-term relationships will decide to tie the knot to make this problem go away.”
If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide independent advice firm Fidelius to offer Rest Less members a free initial consultation* with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,500 reviews on VouchedFor, the review site for financial advisors.
Rights to property and assets
If you’re married or in a civil partnership your husband or civil partner will automatically inherit some of the money and/or property you leave when you die, even if you haven’t made a will. This isn’t the case for couples who live together.
In England and Wales, if you die without a will and are married or in a civil partnership, the rules of intestacy are as follows:
- If you have a spouse or civil partner but no children and the money and property you own is worth up to £450,000, they will inherit everything.
- If you have a spouse or civil partner but no children and the money and property you own is worth over £450,000, your husband or civil partner will get the first £450,000, plus personal possessions plus half the rest. The other half is split between your parents equally or (if none surviving) between brothers and sisters.
- If you have a husband or civil partner and a child/children and the money and property you own is worth up to £250,000, your husband or civil partner will inherit everything.
- If you have a husband or civil partner and a child/children and the money and property you own is worth over £250,000, your husband or civil partner will get the first £250,000, plus personal possessions. Your husband or civil partner also has a right to interest on half the value of what is left over, while the other half is split equally between your children.
However, if you are co-habiting with your partner and but are unmarried, you won’t have the same automatic rights as those who are married.This means that anything which belonged to the partner who died will usually go to their relatives, even if they have cohabited with their partner for several decades.
Ms Sterland said: “Having wills in place is especially crucial for unmarried couples in long-term relationships – as intestacy rules could lead to an unwelcome distribution of assets at death – and for blended families where uncertainty and misunderstanding can arise. Where the family home is not jointly owned, that could also create issues at death and couples can consider how their property is owned at the same time as looking at Wills.
“Even where wills are in place, and especially if they were made some time ago, make sure that they still do what you want them to, and that new tax rules do not require a rethink.”
Give yourself peace of mind that you’ll have control over what happens to your money and property when you die. A legally-binding will can ensure your wishes are followed and avoid complications for your loved ones at a very difficult time. If you’re looking for somewhere to start, we have partnered with Farewill. They have an excellent rating on Trustpilot and are offering Rest Less members a 20% discount off the cost of writing their will.
Don’t forget the Marriage Allowance!
The Marriage Allowance is a tax benefit available to married couples or civil partners. It allows people to transfer around 10% of their personal tax allowance to their spouse or civil partner if they meet the eligibility criteria. More than two million eligible couples are thought to be missing out on this tax break; you can check via Gov.uk.
Your Personal Allowance is the amount you can earn before you start paying tax, and in the current tax year it is £12,570. Through the Marriage Allowance, if either you or your spouse earns less than this, the lower earning person can transfer up to £1,260 of their Personal Allowance to the higher-earning individual. This effectively increases the higher-earning person’s Personal Allowance to £13,830.
So, for example:
If you have an income of £11,000, you don’t pay tax as this amount is less than your Personal Allowance.
If your spouse or civil partner earns £21,000, they’ll pay the 20% basic rate tax on £8,430 of their salary, giving them a tax bill of £1,686 for the year. If you claim Marriage Allowance, you can transfer £1,260 of your unused Personal Allowance to your partner. This will change your Personal Allowance to £11,310 and boost theirs to £13,830.
This will mean that now they’ll be paying 20% tax on £7,170, giving them a new tax bill of £1,434, which is a saving of £252. You can learn more about the Marriage Allowance in our guide Marriage Allowance: How does it work and how can you apply?
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