Proposals on Valentine’s Day may be a bit clichéd these days but when it comes to UK tax, there are a number of ways in which married couples, or civil partners, can benefit.
1. Capital gains tax advantages
Chargeable assets transferred between spouses or civil partners are transferred on a no gain/ no loss basis. This enables the transfer of assets to be used as part of a tax planning strategy, meaning that capital gains can become taxable on a lower tax-paying spouse, or jointly to take full advantage of each individual’s annual capital gains tax allowance.
Transfers of assets between spouses or civil partners in a tax year of separation or in the subsequent 3 tax years will also not trigger a capital gains tax liability.
2. Inheritance tax benefits
a. assets left to a spouse on death are covered by the spouse exemption with no inheritance tax being payable;
b. the amounts inherited by the surviving spouse are then not eroded by inheritance tax, enabling the surviving spouse to undertake lifetime inheritance tax planning should they wish;
c. the lifetime allowances remaining unused by the first deceased spouse (because their assts have been covered by the spouse exemption), can be used on the later death of the surviving spouse, reducing the overall liability of the estate.
3. Pension continuity
Although pension balances now fall within the inheritance tax net, they too are covered by the spouse exemption if left to a surviving spouse.
4. Lower earners
Those who do not pay income tax, and whose spouse pays income tax at the basic rate, can benefit from Marriage Allowance – this lets the lower earning spouse transfer £1,260 of their personal allowance to their spouse.
Whilst getting married purely for tax saving reasons is not to be advised, if you are considering whether to get married in 2025, the above pointers should give you an overview of how your tax affairs might be improved.