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6 savvy financial reasons to get married

  • Tax

Discussing the financial benefits of getting married or entering a civil partnership may not seem romantic. But these six reasons to tie the knot to potentially reduce tax, pass on assets, and more could help you get the most out of your wealth and create long-term security.

The Marriage Allowance could reduce your Income Tax bill

If you or your partner don’t make full use of the Personal Allowance, the Marriage Allowance could collectively reduce your Income Tax bill.

The Personal Allowance is the amount you can earn before Income Tax is due, which is £12,570 for the 2023/24 tax year. If you or your partner don’t use all the Personal Allowance, the Marriage Allowance means that £1,260 could be transferred. This could reduce your Income Tax bill by up to £252 a year.

To be eligible, one partner needs to be a non-taxpayer, with the other partner being a basic-rate taxpayer for Income Tax purposes.

For the 2023/24 tax year, this means the basic-rate taxpayer can earn up to £50,270, whilst the non-taxpayer will usually earn under £12,570 to make use of the Marriage Allowance.

If you’re entitled to the Marriage Allowance but haven’t claimed it, you can backdate your claim to the 2018/19 tax year. The non-taxpaying partner will need to make the claim using the application form found on HMRc’s website.

Transferring money or assets could help you make the most of tax allowances

If you’re married or in a civil partnership, you can transfer assets to your partner without having to worry about tax implications.

One of the benefits of this is that many tax allowances are for individuals. So, by transferring assets, you could make use of both your allowances to maximise tax benefits.

For instance, Capital Gains Tax (CGT) is paid when you make a profit selling some assets, including second properties, investments (not held in a tax-efficient wrapper, ie ISA) and some material items.

For the 2023/24 tax year, the CGT annual exempt amount means you can make up to £6,000 before CGT may be due. By planning as a couple and transferring assets, you could make up to £12,000 before paying CGT. This is a part of the new legislation introduced.

You could receive more from the State Pension if they pass away

If you don’t receive the full State Pension, you may be able to get extra payments if your partner passes away. This benefit could mean you or your partner is more financially secure if the worst happens.

If you’re entitled to more State Pension, how much you could receive will depend on a range of factors, including when you reached State Pension Age and your National Insurance contributions. Please contact us if you have any questions about increasing your State Pension and creating long-term financial security for your partner.

The additional annual subscription provides a tax-efficient way to pass on ISA wealth

ISAs provide a tax-efficient way to save or invest. So, they may be one of your most valuable assets. Under the current rules, each individual can add up to £20,000 to ISAs each tax year.

If you pass away, the additional annual subscription means a spouse or civil partner can inherit an ISA and still retain the tax benefits. As well as their usual £20,000 annual subscription, they’d also be able to deposit the sum they’ve inherited.  

You can leave assets to your partner without having to consider Inheritance Tax

If the entire value of your estate is more than the nil-rate band, which is £325,000 in 2023/24, it could be liable for Inheritance Tax (IHT) when you pass away. However, assets left to your spouse or civil partner are not liable for IHT. This means you don’t have to worry about them potentially facing a bill when you die.

You can pass on unused Inheritance Tax allowances

Being married or in a civil partnership can also make it more tax-efficient when you’re leaving assets to others.

If you don’t use all your nil-rate band, for instance, because you’ve left your entire estate to your partner, you can pass on the unused allowance. You may also be able to pass on the residence nil-rate band, which is £175,000 in 2023/24 and can be used if you’re passing your main home on to children or grandchildren.

In effect, this means you can pass on up to £1 million as a couple before IHT could be due.

Contact us to discuss financial planning as a couple

Creating a financial plan as a couple can add more complexity as you may have different priorities or concerns. Should you want to enjoy your wealth together, we’d love to be able to help.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.

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