Love, marriage and….tax: What are the tax benefits of being married?

When you think about getting married, the thought of potential tax benefits won’t likely be at the top of your list of key considerations. However, there are some tax benefits that come your way once you’ve tied the knot.

In this article, Jo Summers TEP, partner in our private wealth & tax team, discusses some of these benefits, as well as the drawbacks for those who remain unmarried.

It may come as a surprise to some, but the UK’s legal and tax rules still favour couples who are married or in a registered civil partnership over those who simply cohabit.

Contrary to popular belief, there is no such thing as a ‘common law spouse’. As a result, there are many tax benefits in being married – from inheritance tax and capital gains tax, to succession laws and income tax allowance benefits.

Inheritance Tax (IHT)

When it comes to inheritance tax (IHT), there is usually no IHT due on assets transferring between spouses, either during lifetime or on death.

However, unmarried couples have to pay full IHT – the maximum rate being 40% – on anything they inherit from each other.

Capital Gains Tax (CGT) 

There is an exemption for married couples from capital gains tax (CGT) on assets that are transferred between them.

However, for unmarried couples, the person doing the transfer is liable to pay tax if the value of the asset has gone up since they acquired it. This is the case even though the recipient isn’t paying anything for the asset!

Succession Laws

Succession laws also favour married couples. In England & Wales, unmarried couples have no automatic right to inherit under the intestacy rules, so when one unmarried partner dies, the surviving partner may have to bring a court claim to receive any part of the estate (under the provisions to protect financial dependents).

Income Tax Allowance

There are several other aspects of UK tax that favour married spouses, such as the way spouses can transfer part of an unused Income Tax allowance to each other, which isn’t available to those partners that are unmarried.

So, whilst tax may not factor into your decision to get married, it is important to understand how marriage, or not being married, might affect you and your partner, as this will allow you to plan accordingly.

If you would like more information about how best to protect your interests – either in marriage or as an unmarried couple, our private wealth & tax team can help.

Get in touch for more an informal discussion about your situation.