June is of course peak marriage season. Being a June bride (or groom) reduces the chance that it will not rain on your big day, you can (usually) jet away for a sunny honeymoon and you can look forward to combining all your anniversaries with summer holidays.
But any time of year, getting married or joining in a civil partnership could also mean some big financial advantages.
At Continuum, we are looking at why it can still pay to get married.
You don’t have to tie the knot
Cohabiting couples are actually the fastest growing family group in the UK, with 3.5 million unmarried couples in the country, according to data from the Office of National Statistics – a rise of 772,000 since 2009.
Living together before formalising things has become very common. But there are several areas where these couples could be at risk of losing out financially compared with those who are married or in a civil partnership.
Tax
There are several ways being married or in a civil partnership can help you reduce the tax you pay.
Marriage allowance allows you to transfer up to £1,250 of your personal allowance – the amount you can earn tax free every year – to your husband, wife or partner.
This means they can reduce their tax bill by up to £250 every tax year.
You must have an income of £12,500 or less. Your partner’s income must be between £12,501 and £50,000 (or £43,430 in Scotland).
Marriage allowance claims can be backdated to include any tax year since 5 April 2016 that you were eligible for marriage allowance.
Marriage also doubles your capital gains tax allowance.
Every person in the UK has a capital gains tax allowance of £12,300. This is the amount of gains from the sale of an asset that you can realise before you have to pay capital gains tax on it.
Marriage allows you to double this to £24,600. What’s more married couples are also able to pass ownership of assets without paying capital gains tax, while those who cohabit may have to pay this on anything passed between them.
If you invest in an ISA as an individual, you have an annual allowance of £20,000 (in the current tax year). As a couple, you can invest £40,000, and if your partner passes away, you can inherit their ISA allowance.
Inheritance
In England and Wales, the surviving partner of a cohabiting couple doesn’t have an automatic right to a share of the estate. Married couples and those in civil partnerships can usually leave everything they own to their partner automatically without having to pay inheritance tax on it.
Typically, anything above the nil rate band of £325,000 passed between unmarried individuals might be subject to inheritance tax of 40% usually due within six months of a death.
What’s more, if you’re married or in a civil partnership you can inherit your partner’s unused nil rate band when they die, creating a potential nil rate band of £650,000 for you to use yourself allowing you to pass on more of your estate tax-free when they die.
Property
Cohabiting couples are also treated differently over property ownership. If you own a home with a partner and you are not married or in a civil partnership, it will be as joint tenants, which means their share of the property will pass to you on death, or as tenants in common, which means if they die, their share will be passed on in accordance with their will, and if they don’t have one, by the laws of intestacy. So, if you’re not married, you could find that your late partner’s relatives now own half your house.
Married or not, your financial needs as a couple will be different to those of two individuals. Call us at Continuum for the financial planning designed around your circumstances
Getting some expert help
If you are getting married, it could be time to look at your financial arrangements to ensure that you are taking advantage of all the extra tax and other benefits you could be entitled to. If you are not quite at that stage, it could still be worth getting in touch, to discuss ways see how you and your partner could be better off by making the right arrangements now.
Book a free initial consultation
Book an initial consultation with one of our independent financial advisers or call us on 0345 643 0770 if you would like to discuss further.
The information contained in this article is based on the opinion of Continuum and our understanding of current HMRC taxation rates tax year 2021/22. The levels, bases and reliefs from taxation are subject to individual circumstances and may be subject to change.
The Financial Services Authority does not regulate taxation advice.
