What are the tax advantages of being married?

Senior couple are smiling for the camera while standing in front of their home.

Ask the expert at Smith & Pinching about marriage and Inheritance Tax (IHT) benefits - Credit: Getty Images/iStockphoto

My partner and I have been living together for more than 40 years. We’re not married but have begun to wonder if it might be a good idea because we understand our children may pay less Inheritance Tax if we do. Will being married have any other advantages from a financial perspective?

Matthew Beck Chartered Financial Planner with Smith & Pinching

Matthew Beck is a Chartered Financial Planner with Smith & Pinching - Credit: Smith & Pinching

Matthew Beck from Smith & Pinching responds:

There are occasions where being married or in a civil partnership could give a financial advantage depending on your circumstances. We would need to look at your individual and combined assets, your income levels and family circumstances before being able to say for definite.

Inheritance Tax (IHT) rules certainly do favour married couples and civil partners who have assets in excess of the available exemptions. Under the rules, if one spouse or civil partner dies and leaves their entire estate to the surviving partner, there is no IHT payable. In addition, any unused IHT exemption can be passed on to the surviving spouse/civil partner and added to their own exemptions when they die.

At current rates, a surviving spouse/civil partner could have a potential combined IHT exemption – depending on their family circumstances – of up to £1 million whereas each co-habiting partner will only get half that and each partner’s estate may have an IHT liability. However, under IHT rules, estates worth over £2 million will see a reduction in one element of the exemption relating to their main residence, if applicable to their estate.

In addition, if you pass assets from one to the other during your lifetimes, there could be IHT or Capital Gains Tax implications. Transfers between spouses or civil partners are exempt in both cases.

It’s worth checking your pensions too. In some cases, pension death benefits after the death of the member may only be payable to a spouse or civil partner.

If you have ISA savings and investments, there may be a further advantage of being married. A spouse/civil partner can inherit a one-off additional ISA allowance equivalent to the value of the deceased partner’s ISA holdings, even if the ISAs themselves are left to someone else.

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There could also be potential income tax advantages of being married, if one of you is a basic rate taxpayer and the other a non-taxpayer. The Marriage Allowance allows the non-taxpayer to transfer 10% of their personal allowance to the basic rate taxpayer, meaning that you pay less tax overall as a couple.

Planning will help to ensure that you manage all of your tax liabilities. I suggest you meet with an independent financial adviser to look at the numbers before one of you goes down on one knee!

References to taxation are based on our understanding of current legislation and HMRC practice, both of which may change. Any opinions expressed do not constitute advice.

For more information, please visit www.smith-pinching.co.uk

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