What does marriage mean for your finances?

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If you’re married or in a civil partnership, are you better off financially? There are some specific tax benefits and allowances which married couples and those in a civil partnership benefit from. Find out what they are.

Marriage allowance
One financial benefit of being married is that you may be able to make use of the marriage allowance. It gives married couples and those in a civil partnership a chance for the higher earner to transfer some of their tax allowance to the other partner, if they earn less than the personal allowance. It is worth just over £4 a week to four million couples. You can read more about How the marriage allowance works in my article.

SAVVY TIP The tax break isn’t available to higher rate taxpayers. If you have a couple where one partner pays tax at 40% or 45% and the other doesn’t pay tax, the married couples’ tax break wouldn’t give them any benefit.

Inheritance tax
Inheritance Tax (IHT) used to be something that only the wealthiest people paid. However, decades of soaring house prices have changed all that. In the current tax year (2016-17), you have to pay IHT (or rather, the person sorting out your affairs has to pay it out of your estate) if the property and investments etc that you leave add up to more than £325,000.

SAVVY TIP: Inheritance tax is charged at a rate of 40% on everything you leave that’s worth more than £325,000, so it can add up to many thousands of pounds.

  • You can leave everything to your husband or wife tax free. If you’re married or in civil partnership, you can leave all your worldly goods to your spouse or civil partner when you die and your estate won’t have to pay a penny in inheritance tax.
  • You can effectively double your inheritance tax allowance. Married couples and those in a civil partnership can transfer their unused inheritance tax allowance (sometimes called the nil rate band) to each other.

SAVVY TIP: What that means is that if, for example, your husband died before you and he’d left everything he owned to you, he wouldn’t have used any of its inheritance tax allowance (because spouses can leave anything and everything to each other without paying IHT). When you die your executors can effectively claim your husband’s unused IHT allowance, so there are two lots of £325,000 that can be offset against the value of your estate. There’s more on this in the article called Married couples and civil partners can transfer their IHT allowance – don’t miss out elsewhere in this section.

Capital gains tax
Capital Gains Tax is a tax you pay on the profit you make when you sell assets such as share investments or a second property. You don’t have to pay CGT on every penny of profit as you’re given an annual allowance (which is £11,100 in tax year 2016-17).

  • You can give anything to your husband or civil partner tax free. If you’re married or in civil partnership you can give anything you want to your spouse or civil partner and they won’t have to pay capital gains tax on it — no matter how valuable it is.

SAVVY TIP: If you’re a higher rate taxpayer it’s a useful way of reducing your potential tax liability. Do bear in mind that if you give away something to your spouse or civil partner, you can’t ask for it back!

Your pension
If you are married or in a civil partnership, you may also get some benefits relating to both state and work pensions.

  • State pension: In order to get the full state pension, you must have paid 30 years of National Insurance contributions (or been credited with them if you were out of work or bringing up your children) if you reached state pension age before April 6th 2016, or 35 years if you reached state pension age on or after April 6th.

SAVVY TIP: If you reached state pension age before April 6th 2016 and you don’t have enough to claim the full basic pension, you can claim a state pension worth 60% of your husband’s based on his NI contributions. You can do this if you reached state pension age on or after April 6th, as long as you paid the reduced rate of National Insurance (otherwise called the Married Women’s Stamp) at any point in the last 35 years.

  • Company or occupational pension schemes: Most pension schemes will pay a percentage of the pension you have built up to your spouse or civil partner when you die. Anyone who is dependent on you financially (such as a child) would also be able to claim this pension.

SAVVY TIP: Many couples think that partners have the same rights but unfortunately that’s not the case. It’s all down to the pension scheme’s own rules and — sometimes — how they’re interpreted.

Rights to property and assets
If you’re married or in a civil partnership your husband or civil partner will automatically inherit some of the money and/or property you leave, even if you haven’t made a will. This isn’t the case for couples who live together.

In England and Wales, if you die without a will and are married or in a civil partnership, these are the basic rules for married couples:

  • If you have no children or grandchildren: your husband, wife or civil partner will inherit everything.
  • If you have a child/children and the money and property you own is worth up to £250,000: your husband,wife or civil partner will inherit everything.
  • If you have a child/children and the money and property you own is worth over £250,000: your husband or civil partner will get the first £250,000, plus personal possessions. Your husband or civil partner also has a right to interest on half the value of what is left over, while the other half is split equally between your children.

In Scotland the rules are different.
A spouse or civil partner has ‘prior rights’ which means they have a right to the house worth up to £300,000.

SAVVY TIP: If the house is worth more, the situation can become complex. If you own your home jointly in some circumstances it can automatically pass to the one spouse or partner when the other dies.

Related articles:

Married and maiden names on your bank accounts – can you do this?

Marriage second time around; what to think about

Changing a will after someone’s died – using a deed of variation

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