2023 was a bumper year for weddings in the UK – over 245,000 in fact, which is a marked increase on pre-pandemic figures when the number of couples committing to a marriage or civil union had been in steady decline. Divorce rates have also been falling over the last few years, suggesting that there are more and more happy couples around these days!
Whilst we would hate to suggest that people throw a wedding (or decide to stay married) for any other reason than their attachment to one another, there are tax implications, which, for better or worse, are worth sparing a thought for before marching down the aisle.
Income tax savings
Historically, married couples were all entitled to Married Couples’ Allowance (usually claimed by the husband). That was scrapped for all but the most “senior” couples many moons ago, and the replacement, Marriage Allowance, is available only in limited circumstances. These days, this can only be claimed when one partner earns below the Personal Allowance (£12,570 in 2024-25) and even then, they can only transfer up to 10% of their Personal Allowance to their partner if the higher earner is a basic rate taxpayer.
This allowance is worth up to £250 per year and can be backdated for three tax years. Sadly, the administrative cost can be worth more than the relief in some cases…
Capital Gains Tax savings
Capital Gains Tax (CGT) reliefs are a little more generous, because spouses and civil partners can make gifts of assets to one another and pay no CGT on this. In all other circumstances, if you give away an asset to someone else, you are treated as having sold it for market value, and unless some other form of relief applies any gain may be liable to CGT.
Transferring assets to a spouse or civil partner can be useful for tax planning, and in the past could be used to save £2,000-£3,000 per year by making the most of both spouses annual CGT exemptions.
However, as the exemption has fallen to a mere £3,000 in the current year, the benefits of using up both parties’ allowances has likewise fallen.
Even so, the ability to transfer assets at no gain and no loss to your significant other still has wider tax planning benefits when considered in the round with income tax and Inheritance tax planning.
Inheritance Tax savings
As with lifetime gifts, legacies to a spouse or civil partner on death also pass tax free. With the recent changes to other historically valuable reliefs (notably Business Property Relief and Agricultural Property Relief), making the most of the interspousal relief may again be more important when it comes to minimising the family’s IHT bill, or at least deferring it.
In addition, married couples and civil partners are still entitled to share both the Nil Rate Band and Residential Nil Rate Bank, and, if they have children and a home, they may benefit from up to £1 million total IHT relief on the second death, subject to the overall value of the estate.
Marriage must also be factored in when it comes to Wills. This should always be discussed with your solicitor, but it is worth bearing in mind that any Will written pre-marriage becomes void once the marriage takes place, unless it was written in anticipation of the marriage.
If there is no will, or the will is invalid, surviving spouses or civil partners have an automatic entitlement to at least a share of the estate (which may be shared with surviving children, if there are any). By contrast, because there is no such thing as a common law spouse, an unmarried surviving partner will only be able to inherit when their partner passes away if there is a valid will that makes provision for them, even if they have been living together for decades.
Owning property as joint tenants can be helpful in those circumstances, but that has other tax implications.
Tax considerations before and after marriage
So, as unromantic as it may seem, before saying “I do” it is worth considering whether you need to reconsider any tax planning you already have in place, or whether it is time to start planning and taking advantage of the tax perks of marriage.
Furthermore, if you are instead considering saying “I don’t (anymore)” then it is important to consider the tax implications of doing that too, which could be more far reaching.
Please do get in touch with the Gravita Tax Consultancy Team who will be happy to discuss this or any other tax matters with you.
