Introduction

• Let me start this post with hopefully the most obvious statement I’ve written to date: nobody’s primary reason for getting married should be because for money, let alone purely for tax benefit reasons.
• If you are a regular reader of this blog, you’ll know that in June 2017 I got engaged to the love of my life and we married in Summer 2018. Due to my interest in personal finance I was keen to know if getting married would cause any changes to our financial world.
• While getting married isn’t a unique thing to millennials, when you look at the data it’s clear the majority of people currently getting married are millennials. As of 2013, the average age of getting married in the UK was 31.6 years (32.5 for men, and 30.6 for women).
• In this post I will cover the impact of getting married on a UK resident’s relationship with the tax authorities, focusing on the following 7 key areas:
  • Married Couple’s Allowance & Marriage Allowance
  • Inheritance Tax
  • Capital Gains Tax & Tax-Free Gifts
  • Pensions
  • Will
  • Credit Record
  • Insurance
• Once you’re married the first thing you should do is inform HM Revenue & Customs. Making them aware of your new marital status ensures you are being taxed correctly, you can do this here.

Married Couple’s Allowance & Married Allowance

• As the famous saying goes, ‘the only two definites in life are death and taxes’ and while tax systems almost always see us as individuals, married couples do get given a little more manoeuvring room in arranging their finances to reduce their overall tax bill.
• The first of these is the Married Couple’s Allowance. Claiming Married Couple’s Allowance can reduce your tax bill by £322 to £835.50 which sounds awesome, but there is a significant caveat: to be able to claim you or your partner must have been born before 6^th April 1935. So, unless you or your partner is 82 years old, this won’t apply, sorry!
• For those of us who are not 82 years old or older, there is an alternative. The Marriage Allowance was introduced by the UK government in April 2015, and allows a couple to save up to £238 a year (as of 2018) on their tax bill if they are married or in a civil partnership.
• There is one important point to make on hitting this £238 figure, one individual must earn less than £11,500 and the other individual in the marriage must earn between £11,501 and £45,000. If this is the case, then the first individual can then transfer up to £1,100 of his or her unused tax-free allowance to their partner.
• Importantly it has to be the individual earning less than £11,500 who applies, otherwise the request will be rejected.
• This doesn’t apply to either myself or my wife at the moment, however it could be a useful point to consider in the future. The reason for the first individual earning less than £11,500 is not important, it could be maternity leave, self-employment, volunteering, working part-time or retirement.
• If you are eligible and haven’t claimed up until now, you are in luck. In April 2015 the allowance was £212, in 2016 it increased to £220 and in 2017 was worth £230. Therefore, if you’ve been married the full 3 years, you can still claim for all three years, saving £662, plus the value for 2018.
• Only 2.2m UK couples out of the possible 4.2m who are eligible have claimed this benefit so far, so definitely look into it if you think you might be eligible.

Inheritance tax

• If you are a higher tax band payer arguably the best tax advantage of being married is the ability to pass your investments and other assets to your spouse without paying inheritance tax.
• I know talking about dying in the same sentence as marriage is very morbid, especially given that in the UK on average you’ll marry at 31.6 and not die until you are 81.6 years old, but accidents do happen and knowing you’ll leave your spouse and family better off is a nicer thought.
• How much will it really save though? Currently the UK inheritance tax, often referred so simply as IHT, is charged at 40% on estates worth more than £325,000. So being married or in a civil partnership could save you a significant tax bill.
• Finally, when your partner then dies you are able to utilise both of your allowances when passing assets on to the next generation. Therefore, a married couple can leave up to £650,000 to their children before IHT is applied.

Pay less capital gains tax

• While being married won’t save a middle class couple much money in your income tax bill, it can have more of an impact on how much tax you pay on capital gains. If you are selling assets (be it shares, property, funds etc.) then you will be taxed on any financial gain of more than £11,300.
• However, as both individuals in a couple have a capital gains tax exception of £11,300, assets can be passed so that a couple can realise monetary gains of £22,600 per year before tax is applied. This allows you to gift possessions to your spouse tax-free.

Pensions

• If you or a spouse have been lucky enough to have one of the few out there, as a married individual you can inherit any final salary pension your spouse has earned.
• Make sure you read the T&Cs carefully, in many cases this can pay up to 50% of the pension your deceased partner had, however if you’re not married or in a civil partnership, and only living together for example, you won’t necessarily get this money.
• You’ll notice that I’ve referred to both marriage and civil partnerships are few times in this piece already, so now is probably a good time to mention that civil partners now have the same rights as married partners even if the pension scheme hasn’t been updated to refer to both, the qualification is exactly the same.
• The same is true for non-final salary pensions, if you are married you are able to pass to a spouse without tax implications.

Will

• I didn’t know this, but it makes sense when you think about it for more than a couple of minutes: Once you are married, any existing will you might have automatically become invalid. Therefore, on your post-wedding to do list should be setting up a new will, one in which you could name your spouse as your primary beneficiary.

Credit Record

• Whilst getting married does impact what happens to your assets after you die, it does not have an impact on your credit report, at least not unless you want it to.
• However, any new accounts you create together, or if you want to add each other to existing accounts you will become ‘financially associated’ and this could impact your credit record in the future.
• It’s not only new bank accounts or credit cards that will cause this, one of the major financial associations that married couples make is taking out a mortgage.
• Therefore, in terms of hit on credit record, all the costs associated with getting married and the associated celebrations to follow are likely to have more of an impact on your credit record than the actual legal vows!

Insurance

• Another one that was a big surprise to me was the savings you can see simply from being able to tick the ‘married’ box on insurance forms.
• Marital status is one of the things that will statistically have an impact on your likelihood to claim and therefore an impact on the premium you pay. It was worth highlighting that other factors are more important, namely your age, health, previous claims etc. Why?
• Whilst depressing reading for those of us who still feel young at heart the facts don’t lie, married couples are less likely to make lifestyle choices which are more likely to cost insurance companies money, e.g. driving late at night, having an accident having drunk too much in town on a Saturday night.
• The amount of money that you’ll be able to save on different insurance products will of course vary by individuals and historical claims. As an example, Confused.com found that the average cost of motor insurance for a female driver insured with their spouse was £406, compared to £841 if they were insured as a single individual.
• Finally, on insurance, shortly after getting married might be a good time to invest in life insurance, if you haven’t already got any. This is particularly true if you have a substantial financial commitment (e.g. a mortgage) that one partner would not be able to pay if the other wasn’t around.

Conclusion

• Obviously, the primary reason for getting married is because the other person is the love of your life, you both believe in the institution of marriage and you want to share your life together. However if there are financial benefits to be gained, why not ensure you are benefiting as much as you can?
• So, ensure when you marry you add these financial considerations to your to do list…(perhaps after the honeymoon!)
  • Inform HM Revenue & Customs that you are now married. Making them aware of your new marital status ensures you are being taxed correctly, you can do this here.
  • Update your will
  • Check your life insurance
  • Consider renegotiating home & car insurance
  • Apply for the Married Allowance, if you are eligible
• I’ll be honest, I’ve been married for eight months and while some of the above are complete, not all are! The remaining are on the ‘personal finance to do list’ though. This research has also reassured me about pensions as well as inheritance tax, but hopefully the one which will be most applicable to me in the coming years is the sharing of capital gains, allowing us to gift possessions between each other to take full advantage of the £22,600 limit tax-free per year.