Martin Lewis: Is being married financially worth it? The nine big benefits and how to use them to your advantage...
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 while some do it for the romance, is there any financial point in actually being married to them?
Much of the dilemma about 'whether to marry or not' is mixed up with complex competing views on tradition, religion, romance, convention and emotion. Many have happy, long-term stable relationships without wedding ceremonies. Yet when it comes to money, there are some significant financial disadvantages to that.
So below I've listed the main benefits of tying the knot that are structured within the tax and financial system. For those of you who have a principled objection to marriage, as some do, these days the same benefits are conferred if you get a legal civil partnership together. However, choose to be together without marriage or civil partnership and, even after 34 years and 35 children, these benefits don't apply.
From here, where I refer to 'married', 'marriage' or 'spouse', that also ALWAYS includes civil partnerships.
1. You may be due £1,260 worth of tax breaks if you're married
This is deliberate Government social engineering to reward marriage through the tax system. The Marriage Tax Allowance was launched in 2015 and applies where:
- One of the couple is a non-taxpayer (so usually earning under £12,570/yr currently).
- The other is a basic 20% rate taxpayer (so earning £12,570/yr to £50,270/yr currently).
If so, the non-taxpayer can apply to have 10% (£1,260) of their tax-free allowance shifted to the taxpayer. So now the taxpayer has an extra £1,260 of tax-free income they would have been taxed on at 20%, a gain of £252. Once you start claiming this, as long as you're eligible you keep getting it year after year.
Better still, you can back-claim by up to four years, so that means a cheque for £1,006 on top, making it a total gain of £1,258. Full help and info on how to do it in our Marriage Tax Allowance guide.
2. Your spouse won't pay inheritance tax on anything you leave them
When you die, any money, property or assets left to your spouse is automatically exempt from inheritance tax. So whatever you leave them, there is no tax to pay on that.
3. An even more important inheritance tax boon – you can pass on your UNUSED inheritance tax allowance to your spouse
In plain speak, there's no inheritance tax paid on the first £325,000 you leave when you die. Above that, if you're leaving your main residence to your direct descendants, so (step)children or (step)grandchildren, you usually get another £175,000 on top – so £500,000 in total.
So if you leave everything to your spouse when you die, then you haven't used your allowances, and as they're unused, they get passed on to your spouse. This means that when your spouse passes away, they get their allowance and yours, a total of up to £1,000,000 they can pass on without paying inheritance tax on it.
This is a huge benefit, and indeed I've had people get in touch with me who've been together many years, to say after they've heard me explain inheritance tax, they've got married on the back of it. For more details, see our full Inheritance tax help guide.
4. You can freely move savings and investments between spouses, meaning you can take advantage of both of your tax-free allowances
Unlike with other people, savings and investments can be freely moved between spouses – without any risk of later inheritance or capital gains tax. This enables you to ensure the money is in the right person's name to minimise the tax paid. As a fictional example to explain, suppose...
Rod is a higher-rate 40% taxpayer, with savings that earn interest above his personal savings allowance (which in his case is £500/yr interest). He's married to Jane, who has retired and no longer earns enough to pay tax. They have a long-term trusting relationship (ignore scurrilous false rumours of either having an affair with Freddy), so the money can safely be moved to Jane as the non-taxpayer to take advantage of her tax-free annual allowance.
The same concept applies not just if there's a non-taxpayer, if either spouse hasn't used up their personal savings allowance, moving money to take advantage of that works too. See our Top savings guides for help with product choice.
Clearly, being in a trusted relationship is crucial here (see my financial abuse blog). If not, don't do it.
5. You can maximise capital gains tax allowances too
Following on from the point above, if you're selling something (such as shares) which will attract capital gains tax, you get an annual allowance of £3,000 profit which you can earn tax-free. If you'll go over this, you can pass some of the asset to your spouse first (which is tax-free) before selling, to use up both your allowances.
Equally, as capital gains tax is often charged at lower rates for basic 20% income taxpayers than higher 40% income taxpayers, it can be worth shifting the assets to the lower taxpayer first before selling it. See this easy read (well, as easy as it can be for something complex) on capital gains tax for more.
6. There are far more protections if the relationship ends
I recently presented a marriage and divorce podcast, putting questions to, among others, legal specialists (it's well worth a listen). During it, a key point that came up from them was...
While it won't be top of your mind when entering a marriage, if there is a relationship breakdown, there are far more legal protections in place for individuals in a marriage than those cohabiting. This could be particularly important where there is a more financially vulnerable partner, for example, if they don't work due to illness, or because they look after children or relatives.
If a relationship ends for a cohabiting couple, claims are usually limited to property and any benefits for children. For a married couple, things like spousal maintenance and pension sharing orders would be taken into consideration – which could ensure those that are financially vulnerable are better protected.
7. You may get a bigger State Pension if your spouse dies
This is far more likely for those on the OLD State Pension, which means those who hit State Pension age before 6 April 2016. Then 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 – and may also be able to inherit some of their additional State Pension.
Exactly how much depends on a range of factors, such as retirement date. 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 Government's State Pension webpage.
It's also worth noting a few workplace pension schemes will only pass on benefits to a surviving partner if the couple had been married (more likely for 'defined benefits' schemes – more commonly called final- or average-salary schemes).
More pension help in our New State Pension and Personal pension need-to-knows guides.
8. You can inherit your spouse's ISA allowance
While any savings and investments kept inside tax-free ISAs are exempt from inheritance tax when passed on to a spouse, the ISA allowance itself can also be passed on. 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.
In fact, this applies even if the ISA itself isn't passed on. You still get the allowance, eg, if the money in an ISA was left to a child. The spouse can still get an extra ISA allowance that year based on the amount that was in there.
9. Die will-less and an unmarried partner may get nowt
If you aren't married, but share a home with your partner, if you die without a will, your relationship means very little. 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.
PS: While not relevant in this case, if you are married and have dependants, a Lasting Power Of Attorney is in many ways more important than a will. Do check it out.
And finally, NOT tying the knot DOESN'T protect you from being treated as a couple
There are financial pros and cons to being in a relationship. Yet while many of the big tax advantages come only from being married, most of the disadvantages apply to all cohabiting couples, not just married ones.
For the benefits system, it's mostly the fact you are a couple that counts, not your marital status when they means-test how much you earn. Similar is true with the student finance parental contribution assessment – in fact there, if a parent's partner has recently moved in with them, even though they have nothing to do with the child, this can reduce the child's student living loan (implicitly suggesting the new partner is expected to pay).
So I think that's just about all of it. Do let me know if there are any other financial benefits (or dis-benefits) to marriage that you think I may have missed either via the forum link below or via my X (MartinSLewis) account.