Martin Lewis: Is there any point in being married?
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?
Much of the answer is mixed up with complex competing views on tradition, religion, convention and emotion. Many have happy, long-term stable relationships without wedding ceremonies. Yet as last month's royal wedding heightened conversations about the institution of marriage, I thought it worth explaining what difference it makes to your finances.
Marriage, and these days civil partnerships too, still count in many UK laws and rules. People talk about couples who live together but are unmarried as ‘common law partners’, though that’s just a phrase - it doesn’t usually give you rights.
So here’s my list of the seven main financial rights of marriage - including civil partnerships - over just cohabiting (don’t blame me, I’m just the messenger). You’ll note, many of them involve death!
1. 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. The marriage tax allowance was launched three years ago and applies where one half of a married couple or civil partnership 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 would have been 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 means a cheque for £662 - making a total of £900. It takes five minutes to apply for at the Gov.uk website - it’s the non-taxpayer who must do it. If you’ve questions read our Marriage Tax Allowance guide for full help.
2. You may get a bigger state pension if your spouse dies
If your spouse or civil partner dies, you may be able to get extra payments from their pension or national insurance contributions, as long as you’ve not already built up the full basic state pension entitlement yourself, as well as inherit some of their additional state pension.
Exactly how much depends on a range of factors such as retirement date and more. And if you’re not at state pension age yourself and you remarry before you reach it, you won’t be entitled to it. There’s more info on the exact rules on the Gov's state pension website.
It’s also worth noting many workplace, personal and private pension schemes will only pass on benefits to a surviving partner if the couple had been married.
3. 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.
4. 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, the remainder can be passed across to you.
For example, if a wife left everything to her husband, so there was no inheritance tax to pay, her entire £325,000 allowance would pass across to him too. So now when he dies, he has a £650,000 allowance.
The same also applies to any unused portion of the £125,000 property allowance (which reduces tax that the beneficiaries of the will have to pay on the sale of a house). For more see our Inheritance Tax Help guide.
5. You can inherit your spouse's ISA allowance
While any savings and investments kept inside tax-free ISAs are exempt from inheritance tax, the ISA allowance itself can also be passed on to a spouse. So if they’ve £30,000 in ISAs when they die, you get this allowance on top of your own ISA allowance. See Top Cash ISAs for more.
6. Die will-less and your unmarried partner may get nowt
If you aren't married but share a home with your partner - even if you’ve been together thirty years and have 17 kids - if you die without a will, it means nothing. Depending on how the home ownership is structured they could even lose that. So a will is crucial.
For those who are married, laws known as intestacy rules do give some protection, though exactly how it works depends on which part of the UK you live in. Even so, making a will so you can decide exactly where your assets will go is by far the best protection. And it needn’t be that costly - sometimes it’s even free. For full help see our Cheap Wills guide.
7. 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 most people don’t pay tax on their savings any more. It lets basic-rate taxpayers earn up to £1,000 interest a year without having to pay tax on it. 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. See Top Savings for help with product choice.
Plus if you’re selling something (such as 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.