The financial pros and cons of marriage

14 February 2018

You may think that proposing to the one you love on Valentine’s Day is a smart financial move, as married couples benefit from several tax perks.

But accountancy firm Blick Rothenberg says the UK’s personal tax system has inconsistencies when it comes to promoting the institution of marriage.

Tax perks of marriage include the marriage allowance, plus advantages relating to capital gains tax (CGT) and inheritance tax (IHT).

However, Blick Rothenberg says the marriage allowance is “worth very little”, plus there are tax disadvantages for married couples relating to buying property.

Nimesh Shah, a partner at Blick Rothenberg, says: “[Former Prime Minister] David Cameron proclaimed the introduction of the ‘marriage allowance’ would act as a catalyst for preserving marriage in modern Britain. However, the take-up has been low, the allowance is worth very little in real terms and it has been costly to administer for HMRC.”

He adds: “When it comes to buying or selling a property, being married is unlikely to be of benefit. For example, for the purposes of the 3% Stamp Duty Land Tax (SDLT), a married couple is treated as one person; therefore, a married couple would be subject to the higher SDLT cost if either owns another residential property, and the couple is not replacing their main residence.
“This may not be the case if the couple is unmarried and one of the couple does not own another residential property. Similarly, a married couple can only have one main residence for capital gains tax purposes.”

Four tax perks of marriage

But there are tax perks to marriage as we explain below.

1. Marriage allowance (doesn’t apply if either spouse is a higher-rate taxpayer)

Married couples can save up to £230 in tax this financial year through the marriage allowance. Here, a spouse earning less than £11,500 a year can transfer £1,150 of their personal tax-free allowance to their other half. The higher earning spouse must only be earning between £11,001 and £45,000 (£43,000 in Scotland) a year – so this wouldn’t apply to higher rate tax payers.

2. Transfer of assets free of capital gains tax

Ian Dyall, head of estate planning at Tilney explains: “Ordinarily, an individual selling an asset for a profit can realise up to £11,300 in gains in the tax year before a tax charge becomes due.

“Before the sale however, assets can be transferred freely between spouses/ civil partners – with no liability to tax – to utilise the extent of their combined capital gains tax allowance (two x £11,300) or indeed they can be transferred in full to the spouse/civil partner who is expected to incur the lowest capital gains tax charge.

“Either way, by splitting assets first, the couple could potentially save thousands in tax.  This option is not available to unmarried couples, as movement of assets between co-habiting couples is a disposal for capital gains purposes and would negate the benefits of this.”

3. Big gain on death

Unmarried couples can pass assets valued up to £325,000 upon death, but anything above this is subject to 40% inheritance tax. Therefore if a partner is left a house that far exceeds this value, for example, they could end up having to sell it.

Mr Dyall says: “However, a deceased spouse / civil partner can pass an estate of any worth to the surviving spouse without immediate tax consequences. Furthermore, any unused inheritance tax nil rate band by the deceased can be passed to his / her beloved spouse for their use in the future; creating a potential nil rate band of £650,000 for the survivor.”

From 6 April 2017, the residence nil rate band (RNRB) was introduced and a married spouse is now able to potentially claim a further £200,000, resulting in £850,000 combined. Furthermore, the RNRB will increase in £25,000 increments (per individual) during each of the proceeding three tax-years, until it reaches £175,000 by April 2020.

Mr Dyall says: “This will ultimately provide each individual with potentially £500,000, or £1 million for a married couple, in assets that can be passed to beneficiaries free of inheritance tax.”

4. Gifting rules don’t apply to spouses  

There are other inheritance tax advantages of marriage. For example, if you give money or assets to someone during your lifetime it may be classed as a potentially exempt transfer and, should your death occur within seven years from the date of the gift, your beneficiary may be liable to inheritance tax.

However, a gift to your spouse or civil partner is not a potentially exempt transfer and would be ignored for inheritance tax purposes altogether. 


In reply to by anonymous_stub (not verified)

My father is planing to remarry and i would like to have a better understanding of how this could impact of my mothers inheritance. It is my understanding that they had a tenancy in common and when my mother passed she wanted her half to come to her 3 children. My father has remained in the property and is now planing to sell. He has said that he has thought about using my mothers half to purchase another property where he and his new wife will live and on his death it will come to us. How long can she remain in the property on his death? She does not plan to sell her property which i believe her son will remain living in? How does getting married benefit them as i feel there is some manipulation from her side?

In reply to by anonymous_stub (not verified)

Does marriage mean that either spouse then takes on any financial problems which may be unknown beforehand? e.g. tax or debt.

In reply to by anonymous_stub (not verified)

Another potential con of a marriage - is the reduced Occupational pension you receive if you happen to get divorced!For the less than 10 yr. marriage I had - in the middle of a 30+ year career, my Pension provider disregards the (major) periods when I was single, when it comes to determining any "refund" due. The fact that I had been married at all is their deciding factor - even though I have NO spouse to receive a % of it when I die. They also "withold" an element JUST IN CASE you should remarry.

In reply to by Amanda Carruth… (not verified)

Hello Amanda, Firstly I would like to state I am no expert. However, as far as I am aware your father would need to protect you legally by putting in a prenuptial agreement that the money he has used that was your mothers would be given to you upon his death. If he does not do this his new wife would inherit. She may be more happy to do this than you would think as if she dies first your father would inherit the property and her son would be entitled to nothing. You can always call your local citizens advice for free reliable information. They would know much more about the legality’s than me. Hope you get it sorted Amelia

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