Do you pay less tax if you’re married?
When it comes to saving tax, you’ll sometimes need the support of your loved ones. Now could be the time to show your tax allowances some love too. Here’s how to work with your partner to help save tax together.
Last Updated: 10 January 2025
Just being married doesn’t mean you save tax automatically. There are some steps you need to take, and rules to follow, to maximise your tax allowances as a married or civil partnership couple.
Some tax allowances are generous and wellnown, others are a bit more complicated. If you’re a high earner or your household income is high, you’ll need to be smart about how you use them.
This article isn’t personal advice. Tax rules can change and benefits depend on your circumstances. If you’re not sure what to do, or what’s right for you, the HL Financial Advice Service is worth exploring. We can give advice on how to make the most of your tax allowances, but if you need complex tax calculations you should speak to a tax specialist.
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The marriage allowance
Married couples and civil partners may be able to transfer some of their income tax personal allowance to their spouse.
If you earn less than the £12,570 personal allowance and your spouse is a basic rate taxpayer, you can gift £1,260 of your allowance. This could save them 20% tax on that £1,260. A potential saving of up to £252.
Better still, you can backdate this saving four tax years, so they could keep even more in their pocket.
Using your spouse’s inheritance tax allowance
This next tip could help the ones you love, while also reducing your inheritance tax (IHT) bill.
IHT is normally charged at 40% on the value of your estate over £500,000 (£1 million per couple). That includes an allowance of up to £175,000 each when you pass your main residence to a direct descendant. If your estate is worth more than this, it could be worth considering starting to give away some of your money now.
As you both have gifting allowances, your partner can help too. You can each give away up to £3,000 per year, as well as an unlimited number of small gifts up to £250 to each person provided you haven’t already given any other gifts to the same person during the same tax year. You can also use some of your unused gifting allowance from the previous tax year so you might even be able to pass on more.
Although, there always seems to be a “but” with tax rules. In this case, it’s the seven-year rule. You normally don’t have to pay IHT on gifts that don’t fall within one of the exemptions (including those exemptions covered above), as long as you live for more than seven years after making the gift.
Using your ISA allowances as a married couple
It wouldn’t be a tax article if we didn’t talk about ISA allowances. Although they might not be right for everyone, these are usually the most popular tools to help save on UK income tax and capital gains tax.
UK adults each have an annual ISA allowance of £20,000 (for the 2024/25 tax year), which is pretty generous for most people. Even if you’ve used your full allowance, don’t forget to make sure your partner uses theirs if they can and it’s right for their circumstances. If you choose to hold investments, it’s important to remember they will fall as well as rise in value, so you could get back less than you invest.
How much can you pay into a pension
Want to leave investing to the experts?
HL's Ready-Made Investments offer an easy way to invest this year's ISA allowance.
It’s an all-in-one investment that lets you leave the day-to-day decisions to a team of experts, while sheltering your money from tax.
All you need to do is choose the option that best suits your needs and check in from time to time to make sure it still meets your goals.
How married couples can use their pension allowances
For most people the maximum amount you can add to pensions each tax year before triggering a tax charge is £60,000. Unfortunately, you can’t share each other’s pension allowance. But you can look at which tax brackets you both fall into and work out how much each of you could contribute to reduce tax within your means.
Individually, you might also be able to carry forward any unused pension allowance from the previous three tax years. To help work out how much this could be for each of you, use our online calculator.
Married couples can also reduce their tax bill by contributing to a non-earning spouse’s pension. You can pay up to £3,600 a year into your spouse’s pension, even if they don’t earn, which includes the tax relief added. This can lower the higher earner’s taxable income, maximising the annual allowance across both pensions.
TRY CARRY FORWARD AND ANNUAL ALLOWANCE CALCULATOR
Book a call with our advice team
If you think you could benefit from getting expert financial advice from a qualified professional, contact our advice team today. They can talk you through the advice service we offer, including charges, to help you work out if it’s the right fit for your needs.
You won’t get personal advice at this stage, but if advice is right for you, they’ll put you in touch with an adviser for a first meeting.
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