Weddings don’t come cheap, but tying the knot (either by getting married or forming a civil partnership) can save you a fortune in the long run due to a host of tax benefits that are available when you make your relationship official.
Karen Barrett, Chief Executive of the financial advice platform unbiased.co.uk, says: “We’d never advocate getting married purely for money, but there are financial advantages to tying the knot that shouldn’t be underestimated.”
Below are some of the tax breaks that married couples and those in civil partnerships benefit from:
Capital gains tax
If you are married or in a civil partnership, you can transfer assets freely to and from your spouse without paying capital gains tax (CGT). This might be particularly useful in future years as the annual CGT exemption (the profit you can make every year without paying tax) halves from £12,300 to £6,000 in April 2023 and then again to £3,000 in April 2024.
Inheritance tax (IHT)
IHT is often voted the UK’s most hated tax for a good reason, as it can take a sizable chunk out of a loved one’s estate. For unmarried couples, the survivor may have to pay 40 per cent on anything they inherit above £325,000 (the tax-free threshold). That could mean that they can no longer afford to live in the home they shared with their other half.
Married couples can pass assets to each other, both when they are alive and upon death, without incurring any IHT, giving them the potential to shelter hundreds of thousands of pounds from the taxman.
Marriage allowance
The marriage allowance enables married couples and those in civil partnerships to make the most of their annual income tax allowances.
A non-tax paying spouse can transfer £1,260 (10 per cent) of their personal income tax allowance, which is the amount you can earn every year without paying tax, to their taxpaying husband or wife. This can save a couple up to £252 a year in income tax.
Saving money for the big day
The average spend on a wedding is £17,645, but there’s no reason why you can’t do it for less. Unbiased has looked at how you can save that amount if you start putting money away every month.
Here’s how long it would take you to save £17,645 with an interest rate of 4% per year.
- £700 a month would take 2 years and 1 month
- £500 a month would take 2 years and 10 months
- £400 a month would take 3 years and 6 months
- £200 a month would take 6 years and 6 months
Unbiased entered into a two-year-long partnership with Samaritans in September 2022 to reduce the number of mental health issues due to money worries and Karen Barrett urges couples to have open conversations about finances before they commit.
“We’d also suggest that couples sit down and talk about money early on in their relationship. It’s taboo in this country, and it shouldn’t be. Money is a huge source of friction in relationships, with *26% of couples arguing about it at least once a week* If you have open conversations about money and make sure you are on the same page when it comes to finances at the start of a relationship, it can save a lot of heartache,” she says.
