1. Potential tax breaks
Martin Lewis (pictured) lists nine financial benefits of being married in his latest blog post
Martin highlights that the UK government ‘rewards’ marriage through a policy introduced in 2015 called the Marriage Tax Allowance.
It’s relevant in cases where one spouse is a non-taxpayer – earning under £12,570 a year – and the other is a 20 per cent rate taxpayer.
Twenty per cent rate tax payers are those who earn between £12,570 and £50,270.
In this situation, the non-taxpayer can apply to have 10 per cent – £1,260 – of their tax-free allowance transferred to their tax-paying spouse.
As a result, the tax-paying spouse has an additional £1,260 of tax-free income. Because this would previously have been taxed at 20 per cent, he or she is making a gain of £252.
Martin explains: ‘Once you start claiming this, as long as you’re eligible you keep getting it year after year.’
No less important is the fact that it’s possible to back-claim up to four years, which equates to £1,006. In this situation, the total gain is as high as £1,258.
2. No inheritance tax
For married couples, whatever one spouse leaves to the other when they die will not be subject to inheritance tax – whether money, property or other assets like shares.
Partners who are not married, on the other hand, will be required to pay inheritance tax on assets that exceed £325,000 at a rate of 40 per cent.
3. Transfer unused inheritance tax allowance to spouse
Married couples – as opposed to couples who are simply cohabiting – receive tax breaks under the Marriage Tax Allowance
Whatever one spouse leaves to the other when they die is not subject to inheritance tax.
Anyone else who receives assets when someone dies does not need to pay inheritance tax on the first £325,000.
In the case of children or step-children (or grandchildren or step-grandchildren) who inherit their deceased relative’s main residence, they generally get another £175,000 tax-free – bringing the total to £500,000.
The important point here is that if someone has left everything to their husband or wife, they have not made use of the aforementioned allowances.
And, as such, the allowances get passed on to the surviving spouse – on top of their own.
So, when they die, they get a total of up to £1,000,000 they can pass on without inheritance tax coming into play.
4. Ability to move savings and investments between spouses
‘Unlike with other people, savings and investments can be freely moved between spouses – without any risk of later inheritance or capital gains tax,’ Martin explains.
As the UK government website explains, Capital Gains Tax is a tax on the profit you make when you sell an asset that has gone up in value.
This particular benefit helps married couples minimise their tax bill by seeing that money is in the right person’s name. In other words, if there is a non-tax-paying spouse, it is financially sensible to transfer money to them.
And, even if both spouses do pay tax, it may be that one hasn’t made full use of their personal savings allowance.
For most people, a personal savings allowance enables you to earn up to £1,000 in interest tax free.
It is, therefore, worth putting the money in the name of the spouse who hasn’t used their personal savings allowance.
The Money Saving Expert founder, 52, also has a weekly ITV show – The Martin Lewis Money Show
5. Maximise capital gains tax allowances
Fifth on Martin’s list of the financial benefits that a married couple can enjoy – which aren’t applicable to cohabiting couples – concerns capital gains tax allowances.
When you sell an asset that is subject to capital gains tax, for example, shares, you are entitled to an annual allowance of £3,000 profit tax-free.
But, if it is likely that you will go above the £3,000 threshold, it is possible to give some of the asset to your husband or wife first.
In this situation, you are taking advantage of both your allowances.
The money saving guru also pointed out that because capital gains tax is ‘charged at lower rates for basic 20 per cent income taxpayers than higher 40 per cent income taxpayers,’ it could be beneficial to transfer the assets to the spouse who pays lower tax – before selling it.
6. Protective measures if relationship ends
Compared to a couple who are cohabiting, a married couple will find that they are better protected if the relationship comes to an end.
If a relationship breaks down, a married couple is far better protected than a cohabiting one
Martin highlighted that this is ‘particularly important where there is a more financially vulnerable partner’ – for example, someone who is unable to work because they’re unwell or caring for children or others.
Spousal maintenance and pension sharing orders are considered by the courts when a marriage breaks down.
By contrast, when two people are cohabiting, the more financially vulnerable partner would only be able to lay claim to property or child benefits.
7. A larger State Pension if your husband or wife dies
In his blog, Martin drew attention to the fact that, in some cases, a surviving spouse or civil partner may be able to get additional payments from the dead spouse’s pension or National Insurance contributions – and may even be able to inherit some of their State Pension.
But there’s a catch. This tends to be relevant only those who ‘hit State Pension age before 6 April 2016’.
Factors that influence how much a surviving spouse would get include retirement date and if – and at what age – they have remarried.
Martin highlights that a surviving spouse who is ‘not at State Pension age’ and remarries before they reach it, is not entitled to it.
Similarly, some workplace schemes only recognise married couples – and will not pass on benefits in a situation where the partners have simply been living together.
8. Ability to inherit spouse’s ISA allowance
‘While any savings and investments kept inside tax-free ISAs are exempt from inheritance tax when passed on to a spouse, the ISA allowance itself can also be passed on,’ Martin Lewis writes.
For example, it the dead spouse has an ISA worth £30,000, the surviving partner will get that in addition to their own ISA allowance.
And, in cases where the ISA isn’t passed on to the surviving husband or wife, they can still claim an additional ISA allowance that year in line with the amount of money that was in their late spouse’s.
9. What happens if you die without a will
For couples who simply cohabit, it is essential that both partners have a will. While it may seem unfair, ‘your relationship means very little’ in the eyes of the law if there is no will.
Martin points out that, in this case, the surviving partner could even lose the home they shared with their partner.
By contrast, laws known as intestacy rules protect a surviving spouse even if their husband of wife did not write a will – though intestacy rules are not consistent across the country.
Yet, whether you are married or cohabiting, it is still prudent to have a will, Martin stresses.