The financial benefits of getting married – from capital gains tax to inheritance tax

Fewer and fewer people are getting married, but tying the knot brings with it a host of benefits that could boost your finances.

There were 224,402 marriages in England and Wales in 2023, down from 246,897 in 2022, according to the Office for National Statistics (ONS).

Contrast it to 50 years ago and the figures are starker – there were 400,435 marriages in 1973.

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The trend is likely to continue in the same direction.

The number of young people getting hitched has plummeted, analysis from the think tank Centre for Social Justice shows.

Just 2% of men are married by 25 in 2026, down from 62% 50 years ago. For women aged 25, over the same time period, the figure has dropped from 82% to 4%.

Meanwhile, men who have reached state pension age today are more likely to say ‘I do’ than men in their early twenties.

Alongside the obvious emotional positives, getting married can bring with it significant legal, financial and tax privileges.

Alice Haine, head of personal finance at investment platform Hargreaves Lansdown, said: “Married couples and civil partners have some unique tax advantages over their unmarried peers.

“With more people being dragged into paying tax on their savings and investments, making the most of them really matters.”

Combining your ISA allowance

One major financial benefit of getting married is that you can combine your annual ISA allowances.

Each year, everyone over the age of 18 can put up to £20,000 into ISAs. An ISA (which stands for Individual Savings Account) is a tax-efficient wrapper, which allows you to save and invest money without having to pay income tax and capital gains tax.

You can’t open a joint ISA with someone else. However, if they are savvy, married couples can essentially double their annual ISA allowance to £40,000 by working together.

For example, if your other half hasn’t maximised their allowance (which is an annual “use it or lose it” privilege), but you have already put away £20,000, you can pay some money into their account to avoid the remaining allowance going to waste.

Of course, the option of paying money into someone else’s account is open to anyone, married or otherwise. However, unmarried couples who split up could struggle to recover these funds, meaning they are ultimately less protected.

If you die, your spouse can inherit your ISA allowance, equal to the value of your ISA at the time of death, through an additional permitted subscription (APS).

Ben Glassman, head of family and managing partner at wealth management firm Evelyn Partners, said: “This additional ISA allowance is broadly linked to the value of the deceased’s ISA holdings and is available in addition to the survivor’s own annual ISA allowance.

“This can allow the surviving spouse or civil partner to retain the tax-efficient status of assets inherited from the deceased’s ISA. The equivalent benefit is not available to an unmarried partner.”

Other tax-free allowances you can share 

Once you have maximised your ISA allowance, most other savings or investments are fair game for the taxman. However, this only kicks in once you exceed a certain threshold. And, crucially, married couples can take steps to share these allowances between them.

Before delving into the efficiencies that married couples can take advantage of, we summarise the general rules below:

• Dividends: Once you exceed the £500 annual dividend allowance, you will need to pay tax on any dividend income above this threshold.
• Capital gains: Once you exceed the £3,000 capital gains allowance, you will need to pay tax on any gains you make upon selling an asset.
• Savings income: If you’re a basic rate taxpayer, once you start earning more than £1,000 in interest on your savings (known as the personal savings allowance), you will need to pay tax on any additional interest you earn. This is £500 for higher rate taxpayers. There’s no personal savings allowance for additional rate taxpayers.

If you are married and you have maximised the above allowances already, it might make sense to transfer some of your assets into your partner’s name.

This will help you reduce your overall tax bill and, as you’re married, the transfer won’t count as a gift for inheritance tax purposes.

If you’re not married, gifts can be subject to a whole set of additional tax rules – particularly if given less than seven years before you die.

The marriage allowance

Most people in the UK have a personal allowance, which means that you don’t pay any income tax until you start earning £12,570. Then, you will only be taxed on anything above this threshold. Everyone is entitled to the full personal allowance until their income hits £100,000, at which point it begins to go down.

But HMRC also rewards the institution of marriage through the tax system.

Depending on how much each partner earns, married couples are allowed to transfer some of their personal allowance between one another, if they haven’t used it all up. This is called the marriage tax allowance. This benefit is only available if the higher earner is a basic rate taxpayer, meaning they have an income between £12,570 and £50,270.

The maximum amount that can be transferred between partners is £1,260.

Income on a buy-to-let property 

If you and your partner own a buy-to-let property and you are on different income tax thresholds, then it may make sense to transfer the property into the name of the lowest earner.

That way, they can put their personal allowance (if they have any of it left) towards any income earned on the house.

Furthermore, the remaining income that you earn on the property will be subject to a lower rate of tax.

It’s worth noting, the above tax rates are set to increase from April 2027, with the basic rate rising to 22%, the higher rate to 42% and the additional rate to 47%.

You don’t have to be married to transfer a house into someone else’s name. However, if you aren’t married and you decide to separate, your legal rights will be far less protected.

Furthermore, as a 'gift' between unmarried partners, the house could be subject to a hefty inheritance tax bill if you die within seven years of passing it over.

Protecting your estate and minimising inheritance tax

You can pass on assets of up to £325,000 without your loved ones having to pay inheritance tax (IHT). This is called the nil-rate band. However, as soon as you exceed this limit, the value of assets above this threshold could be subject to 40% inheritance tax.

If an unmarried couple share a house (and the deceased partner’s share exceeds £325,000), the remaining partner could be left with an inheritance tax bill. If they don’t have the cash available at the time, they could end up having to sell the family home.

However, married couples can pass on their estate to a spouse without any immediate inheritance tax implications. Furthermore, if they don’t use up their nil-rate band, they can pass that on to their spouse to use in the future too.

If your estate is worth less than £2 million, and you pass your main home on to your children or stepchildren (or other “lineal descendants”, such as grandchildren), you could get an extra allowance, called the residence nil-rate band. This is worth £175,000. Married couples can combine this allowance.

When you add all of these allowances together (£325,000 + £325,000 + £175,000 + £175,000), married couples can theoretically pass on an estate worth £1 million to their children without any tax being due.

Using up these allowances is all the more important with unused pensions set to form part of estates from April 2027.

Glassman said: “Once most unspent pension funds and death benefits become liable to inheritance tax from 6 April 2027, the ability to leave assets to a spouse or civil partner free from IHT will become even more valuable.

“For families with substantial pension wealth, the spousal exemption could become one of the most important ways of avoiding an immediate IHT charge on inherited pension assets.”

Nine steps unmarried couples can take to protect themselves

1. Consider how you hold pension and other savings

Don’t rely on your partner’s pension. Build up your own pot. If you split and you’re not married there is no legal requirement for them to share their pension with you. You should both consider making the best possible use of your ISA allowances too.

2. Complete a ‘nomination of beneficiaries’ form

Most pensions will pay out to a spouse when you die. If you’re not married, you can complete an expression of wish form (also called a nomination form) to ask for anything in your pension to pass to your partner.

3. Make a will

If you want your partner to inherit some or all of your estate when you die and you’re not wed, you will need to draw up a legal will. Otherwise they could inherit nothing, as it will go to blood relatives first, under intestacy rules.

4. Write-up a co-habitation agreement

This contract of sorts lets you both formalise who owns what, how much each of you contribute to bills and what happens in the event you split, including how any children you may have should be supported.

5. Get on the birth certificate

This will give the father the automatic right to care for the child if the mother dies. Otherwise both the mother and father will need to complete a parental responsibility agreement – which needs to have happened before the death.

6. Lifetime gifts could save you tax

Inheritance tax breaks for married couples mean you can inherit an unlimited amount from your spouse. This doesn’t apply to cohabiting couples. So it’s worth considering whether it makes sense to give gifts during your lifetime which can fall outside of your estate for tax purposes if they are within the inheritance tax gift allowances or given at least seven years before death.

7. Think carefully about how all assets are owned

If one of you moved in with the other, and the home remains in their name, it remains their home – if you split you could lose everything if you're unmarried. If you both pay for the running of the home, consider switching to owning the property between you. If you want to reflect unequal shares in a property, you can do this as tenants in common.

Also think before taking on any debt: if the loan is for the benefit of both of you, it should be in both names. Consider your savings, if you’re saving together, it should be in both names.

8. Get life insurance

Both of you should have enough insurance to ensure any children are provided for in the event you die. After a split, the resident parent should have cover and if one of you is paying child support, they should have cover that will replace it in the event of their death.

9. Build a nest egg for any children

One of the best ways to protect children against whatever the future holds is for them to have savings and investments in their own name. A Junior ISA can be a really sensible option. Nobody can access the money until they are 18, and at that point it belongs entirely to the child. Plus, money in a Junior ISA is shielded from tax on dividends, capital gains, and interest.