Finance expert shares how people getting married could get up to £190,000 in tax savings
Married couples or those in a civil partnership can benefit from a series of tax breaks.
Millions of Brits could decide to tie the knot this year, purely to reduce potential future tax bills and experts say it can be a really good idea, even if it feels a bit unromantic. Martin Lewis recently tackled the topic on his Money Show Live Valentine’s Day special, and since then, social media and forums have been flooded with posts from people eager to understand this more.
The consumer champion shared how nearly two million married couples and those in a civil partnership could be eligible for a tax break worth more than £1,200 - just for being together. People can claim the annual rebate - worth £25 for the 2024/25 financial year - through the Marriage Tax Allowance from HM Revenue and Customs (HMRC).
Claims made before April 5, 2025 can be backdated by up to four years - taking it to the 2020/21 tax year - which means some couples could potentially be due tax relief of up to £1,260.
READ MORE: Martin Lewis urges married couples under 90 to claim income boost of up to £1,260READ MORE: New TV licence could be introduced for people only watching streaming servicesTo help people through the process and understand the rules, Josh White, financial expert at the probate lending firm Level Group, answers the most common questions.
Why are more people considering marriage for tax reasons?
While inheritance tax hasn’t historically been an issue for most people, experts have predicted that new rules being brought in will mean the number of families facing an inheritance tax bill will double by 2030, to one in ten.
Most people want to avoid paying tax if they legally can and this offers a fairly simple solution to saving quite a lot of money long-term.
What tax benefits do married couples get?
Day to day there are various savings to be made from being married. These include The Married Couple’s allowance, which can save you up to £1,108 per year. However, the biggest tax benefits come when someone passes away, and it relates to inheritance tax.
Inheritance Tax (also known as IHT) is a tax on the estate of someone who has died. Their estate includes things such as property, other possessions (cars etc.) and money.
The standard tax-free threshold is currently set at £325,000 per person, and typically 40 per cent tax is paid on anything over this. However, if you’re married and are both UK residents, when you or your partner dies, the estate left to the surviving spouse is exempt from inheritance tax, no matter how valuable it is.
When the second partner passes away, their beneficiaries (which may be your children) can benefit from something called the ‘transferable nil rate band’, which can effectively increase their inheritance tax threshold to £650,000 (if it’s not already been used).
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There is also an additional tax allowance called the “residence nil rate band” (or RNRB) which relates to property passed on to direct descendants and has a further £175,000 tax-free threshold. This could be potentially doubled if you were married, and the tax benefit wasn’t already used in its entirety.
The home that the surviving spouse leaves to their direct descendants does not have to be the same home they lived in with their partner to qualify for the RNRB, and they also don’t have to have previously owned any home with their late partner for this to apply.
Any assets (such as properties) transferred between spouses during their lifetime are also not liable for inheritance tax, so long as they are gifted seven years before the spouse passes away.
How much money could you save from getting married?
Some research has shown that over a 50-year marriage, a couple could be as much as £190,000 better off, and most of the benefit is a saving in Inheritance Tax.
Does this apply to people in civil partnerships?
Yes, you don’t have to be married to benefit from these tax savings. You can also be in a civil partnership.
Do the same tax rules not apply if you’re co-habiting?
No. It’s a common misconception that cohabiting couples or ‘common law spouses’ will automatically inherit everything from the other and enjoy the same tax benefits as married couples. Sadly, though this is not the case.
If you own a house together and have no Will in place naming your partner as your ‘heir’, they will not automatically inherit your share of that property when you pass away. It’ll go to their next of kin instead, which may be their parents or a child.
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What if you later get divorced?
If you get a divorce, you’ll no longer benefit from the same tax benefits as a married couple upon your death (or your ex-partners). However, assets a former spouse gifted to you while married will still be exempt from IHT so long as the gift was made at least seven years before they passed away.
What if you really don’t want to get married?
In the UK, using trusts can be a legitimate way to reduce the impact of inheritance tax if you aren’t married or in a civil partnership, but it requires careful planning.
By placing assets into a ‘Lifetime Gift Trust’ (during your lifetime) for example, the value of those assets is no longer considered part of your estate after seven years. This means they may not be subject to IHT upon your death.
It's crucial to remember though that trusts come with various caveats, and HMRC scrutinises these and other measures designed to avoid paying tax. Using trusts solely for tax avoidance purposes may not be effective or could have unintended consequences so it’s always best to consult a financial advisor first.
Backdated Marriage Allowance payments
You can backdate your claim to include any tax year since April 5, 2020 that you were eligible for Marriage Allowance. Your partner’s tax bill will be reduced depending on the Personal Allowance rate for the years you’re backdating.
HMRC also explains that if your partner has died since April 5, 2020 you can still claim - phone the Income Tax helpline on 0300 200 3300, full details here.
HMRC adds: “If your partner was the lower earner, the person responsible for managing their tax affairs needs to phone.”
Below is each tax year and the value of the allowance:
- 2024/25 - £252
- 2023/24 - £252
- 2022/23 - £252
- 2021/22 - £252
- 2020/21 - £250
Full details about Marriage Allowance can be found on GOV.UK here.