5 tax benefits of tying the knot

Love and happiness may be the most important reasons to get hitched, but being married or in a civil partnership also gives tax benefits one doesn’t get when single or co-habiting.  

Some of these could save couples thousands of pounds, and while they hopefully aren’t the only reason for a proposal, making use of the opportunity can help create a tax-efficient union. 

We’ve looked at five ways being married or in a civil partnership could boost a couple’s coffers – if you think they could be helpful but are unsure how to use them effectively, it’s worth talking to a professional, regulated adviser who can help you navigate making the most of the opportunity. 

1. Marriage Allowance 

Just like offering a last Rolo, someone could show their partner some love by boosting the amount they can earn before paying tax.  

The Marriage Allowance lets someone transfer part of their Personal Allowance – up to £1,260 in the 2024/25 tax year – to their spouse or civil partner, giving them a credit that can reduce their tax bill by up to £252 a year.  

To benefit, the Government states that, as well as being married or in a civil partnership, the person transferring their allowance should be a non-taxpayer (receiving less than the Personal Allowance,  which is £12,570 in 2024/25) while the other pays income tax at the basic rate. 

If you’re a Scottish taxpayer this is the starter, basic or intermediate rate. 

However, Tom Henderson, Technical Officer at the Low Incomes Tax Reform Group, warns that couples won’t always benefit – although it’s a relatively rare situation. “If you have variable incomes or your incomes are around the personal allowance [amount], do your sums to check it’s worth claiming,” he explains.  

Where it’s not clear cut, he suggests someone considering using the allowance can delay a claim until after the end of the tax year to be sure it offers a benefit.  

“If you make a claim during the tax year for which you’re claiming, it will automatically roll forward every year until you withdraw it” he says. 

“A claim made after the end of the relevant tax year will only apply to that year, enabling you to check whether it’s worth doing first.” 

Using the allowance after the year has ended can also make things easier if you both become taxpayers or one starts earning at a higher rate of tax – however, if most of your money comes from pensions, it’s likely your income will stay relatively static. 

Claims can be backdated for up to four years and someone can also claim if their partner has died during that time.  

Henderson also recommends checking out the Married Couple's Allowance if one in the couple was born before 6 April 1935 as this is more generous, potentially cutting a tax bill by between £427 and £1,108 a year. 

2. Capital Gains Tax  

If someone is married or in a civil partnership, they can transfer assets between themselves and their partner free of Capital Gains Tax (CGT). It might not sound like the most romantic of gestures, but it could save thousands of pounds.  

“Being able to transfer assets in this way enables you to take advantage of both of your annual CGT allowances (£3,000 per person in 2024/25) and potentially reduce a liability if one of you pays tax at a lower rate,” explains Stephanie Court, Tax Director at RSM UK.  

As an example, take Sarah. She’s a higher rate taxpayer with some shares she wants to sell. These have made a gain of £10,000 – which would leave her with a CGT bill of £1,400 (20% of £7,000) after her £3,000 CGT allowance has been used up.  

To reduce the CGT bill, she transfers 70% of the shares to her husband, Phil, who pays basic rate tax. This allows her to use her annual CGT allowance for the portion she kept and gives him some shares, which have gained in value by £7,000.  

This means, after using his annual CGT allowance to reduce the taxable gain to £4,000, his CGT bill would be £400 (10% of £4,000 as he’s still a basic rate taxpayer after making the gain), saving the couple £1,000.   

3. Pension planning 

Whether someone is still building up their pension or enjoying spending it, married couples can take advantage of tax planning to make their money go further in retirement.  

The key, according to Alan Ball, Chartered Wealth Manager at Russell Gibson Financial Management, is for a couple to take advantage of both their personal allowances when putting money away in a pension, balancing the amount in each pot where possible.  

“Try to equalise pension savings if you’re approaching retirement. If one person has all the pension and the other has nothing, you might end up only using one Personal Allowance,” he says.  

Even if a spouse or civil partner isn’t a taxpayer, they can still save £2,880 into a pension every tax year until age 75, which will be topped up to £3,600 with tax relief.  

Receiving income from different pots enables greater flexibility around tax in retirement, potentially preventing a couple paying income tax altogether.  

As an example, a couple could drawdown from their pensions to use up their personal allowances (that’s £12,750 each for most in this tax year) and then top up with money from savings.  

Unmarried couples can take advantage of the same pension planning tips too, but it’s higher risk for them to pool their money in this way, as there’s less legal protection if they separate. 

4. Inheritance Tax 

Inheritance Tax (IHT) is where married or civil-partnered couples could potentially make the biggest savings.  

In the UK, everyone currently receives an IHT nil rate band of £325,000, plus a further £175,000 of residence nil rate band, which is available if the family home is left to the kids or grandchildren.  

Anything above this is generally subject to IHT at 40%, but there are some planning perks for those who have tied the knot.  

“Married couples and civil partners can leave an estate of any value to their surviving spouse without any IHT charges,” explains Alice Haine, Personal Finance Analyst at Bestinvest. 

“Additionally, they can leave them any unused percentage of the nil rate bands.” 

Assuming everything passes IHT-free between them on first death, this means there would be a nil rate band of up to £1m after the second person passes away (as long as they’re giving their main home to their kids or grandchildren).    

Being married also gives a partner more rights if someone dies without a will. The rules of intestacy, which apply if there’s no valid will, put spouses and civil partners at the top of the pecking order. 

In contrast, the rules don’t recognise an unmarried partner, no matter how long they’ve been together, so without a will they’d receive nothing.  

Even if someone thinks these rules will work for them, Robert Barwise-Carr, Tax Director at accounting firm Forvis Mazars, recommends making sure they have a valid will.  

“The rules [of intestacy] will work for some couples but not for others,” he explains. “For example, they don’t recognise stepchildren unless they have been adopted by the stepparent. This could be particularly relevant to blended families.”  

5. Inheriting an ISA allowance 

Another benefit of tying the knot is that the partner can inherit their other half’s ISA allowance.  

Regardless of whether they're left the money in their partner’s ISA, they are entitled to an additional allowance – known officially as an ‘additional permitted subscription’ (APS) – to boost their tax-free savings and investments.  

Essentially this means they can make additional contributions to their ISA, sheltered from tax, depending on the allowance their partner had built up over the years – which could be quite a bit of money.  

The amount their allowance will increase by is either the value of the deceased’s ISA: 

• At death.
• When the account is closed (which is whenever all funds are withdrawn, the estate is settled or three years has passed since death). 

The actual amount will depend on whichever of the above is of higher value. 

Inheriting this additional allowance can be a major benefit for spouses and civil partners, especially if they’re left the money in the ISA too.  

“If an unmarried partner inherits the contents of an ISA, it loses its tax-free wrapper,” explains Sarah Coles, Head of Personal Finance at Hargreaves Lansdown.  

“If they wanted to, they would have to use their own annual allowances to wrap them back up again.”  

Key takeaways 

As a summary, a married or civil-partnered couple can: 

• Use Marriage Allowance to reduce a tax bill by up to £252 a year – but only in certain circumstances. 
• Transfer assets between themselves and their partner free of Capital Gains Tax (CGT) and reduce the amount owed. 
• Manage pension savings so the pots are more balanced to draw from in retirement. 
• Make use of Inheritance Tax rules to pass up to £650,000 (or £1m if leaving their estate to children) without any charges. 
• Inherit their partner’s ISA allowance, meaning they can make extra contributions into a tax-sheltered account.