Who said love is dead? This year, millions of Brits might be saying “I do” for a reason that’s more financial than romantic – to slash their future tax bills.
The idea has gained traction after Martin Lewis discussed it on his Money Show Live Valentine’s Day special, sparking a flurry of social media and forum posts from people keen to learn more. The consumer champion revealed that nearly two million married couples and civil partners could qualify for a tax break exceeding £1,200, simply by virtue of being in a relationship.
This annual rebate, worth £25 for the 2024/25 fiscal year, can be claimed through the Marriage Tax Allowance from HM Revenue and Customs (HMRC). Claims lodged before April 5, 2025 can be retroactively applied for up to four years, back to the 2020/21 tax year.
This means some couples could potentially receive tax relief amounting to as much as £1,260, reports the Daily Record. To guide people through the process and clarify the regulations, Josh White, a financial expert at probate lending firm Level Group, addresses the most frequently asked questions.
Historically, inheritance tax hasn’t been a concern for the majority of people. However, experts predict that new rules will double the number of families facing an inheritance tax bill by 2030, affecting one in ten households.
Many individuals are keen to minimise their tax liabilities where legally possible. And marriage can provide a relatively straightforward way to achieve significant long-term savings – although liking each other would be a big bonus.
Tax benefits for married couples
There are several financial advantages that come with tying the knot. One of these is the Married Couple’s Allowance, which could save you up to £1,108 annually.
However, the most substantial tax benefits become apparent when one partner passes away, particularly in relation to inheritance tax. Inheritance Tax (IHT) is a levy on the estate (including property, possessions such as cars, and money) of someone who has died.
The current tax-free threshold stands at £325,000 per person, with a typical 40% tax applied to anything exceeding this amount. Yet, if you’re married and both UK residents, any estate left to the surviving spouse is exempt from inheritance tax, regardless of its value.
Upon the death of the second partner, their beneficiaries (potentially your children) may be eligible for the ‘transferable nil rate band’. This can effectively raise their inheritance tax threshold to £650,000 (provided it hasn’t already been utilised).
In addition to the standard inheritance tax allowance, there’s a significant “residence nil rate band” (RNRB) which offers another layer of financial relief to those passing their property on to direct descendants. This bonus allowance stands at £175,000 tax-free threshold and has the potential to be doubled for married individuals if the entire tax benefit has not been previously utilised.
For couples, the survivor can leave a home under the RNRB to their children even if it wasn’t the exact residence shared with their deceased spouse. Moreover, the surviving partner doesn’t need to have co-owned any property with their late partner to qualify for this allowance.
Likewise, assets moved between spouses during their lives are exempt from inheritance tax, provided they’re gifted at least seven years before the gifter dies. Some studies indicate that over a lifetime together—say, 50 years—a married couple could enjoy up to £190,000, predominantly derived from shavings on Inheritance Tax.
Civil partnerships and cohabiting couples
Those in a civil partnership are also able to receive the same kind of benefits as married couples. However, for cohabitating partners, the news isn’t as optimistic.
Many mistakenly believe that living together bestows equal inheritance rights and tax benefits as enjoyed by married duos. Unfortunately, the reality is that ‘common law spouses’ do not automatically inherit everything, nor do they receive the same fiscal privileges as their hitched counterparts.
If you co-own a property and have not designated your partner as your ‘heir’ in a will, they will not automatically receive your portion of the property upon your demise. Instead, it will be passed on to their next of kin, which could be their parents or a child.
What happens if you divorce later?
In the event of a divorce, the tax benefits that married couples enjoy upon death will no longer apply to you (or your ex-partners). However, any assets gifted to you by a former spouse during marriage will remain exempt from Inheritance Tax (IHT), provided the gift was made at least seven years prior to their death.
What if marriage isn’t for you?
For those in the UK who are not married or in a civil partnership, utilising trusts can be a legitimate method to mitigate the impact of inheritance tax, although it necessitates careful planning. By transferring assets into a ‘Lifetime Gift Trust’ while you’re alive, for instance, the value of these assets is no longer considered part of your estate after seven years. This implies they may not be subject to IHT upon your death.
However, bear in mind that trusts come with various stipulations, and HMRC closely examines these and other strategies intended to evade tax payments. Using trusts solely for tax avoidance may not be effective or could lead to unforeseen consequences, so it’s always advisable to seek guidance from a financial advisor first.
Backdated Marriage Allowance payments
You can submit a backdated claim for the Marriage Allowance for any eligible tax year dating back to April 5, 2020. Consequently, your partner’s tax liability will decrease according to the respective Personal Allowance rate of the years being backdated.
HMRC stipulates that even in the event of a partner passing away after April 5, 2020, eligibility for a claim still stands. Claimants can get in touch through the Income Tax helpline at 0300 200 3300, full details here.
HMRC explains further: “If your partner was the lower earner, the person responsible for managing their tax affairs needs to phone.”
The following table provides an overview of the tax years, along with the corresponding allowance value:
- 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.