We all know that tying the knot can affect your day-to-day money management, but exactly what effect does marriage or a civil partnership have on your financial status? We take a look.
There was a time that making the leap from single life to married bliss came with a great range of tax incentives. Married couples used to be viewed by the Government as one single taxable entity and so you would be taxed less after getting married.
The picture is different today: even when joined to another in matrimony, we are now mostly taxed individually, meaning the tax benefits are few and far between.
However, there are some important things to note that will affect your finances after marriage or a civil partnership; we take a look at them.
How will your tax status be affected?
You should inform HM Revenue & Customs of your new marital status to make sure you are taxed correctly. You can do this by following the GOV.UK link below:
Married Couple's Allowance
Since 6th April, 2000, the Married Couple's Allowance has not been available for couples born after 1935.
If you were both born after 1935, you may instead be able to claim Marriage Allowance, which the government introduced in April 2015.
This allows a couple to save up to Ј212 on their tax bill if they are married or in a civil partnership. One partner must earn less than Ј10,600 and the other must earn Ј10,601 to Ј42,385. The former can then transfer up to Ј1,060 of his or her unused tax-free allowance to the latter.
Tax free gifts
One of the most beneficial implications of marriage in terms of tax today is that any gifting between you and your spouse in your lifetime is tax-free. Also, you can leave any possessions and property to your spouse tax-free after you die, meaning the surviving partner effectively gets double the tax-free allowance for inheritance tax.
Your capital gains tax exemption is also effectively doubled, and you and your spouse can transfer assets between each other tax-free during your lifetime.
How will your savings be affected?
Getting married can mean that you get to take advantage of less tax on your savings interest if one of you is in a different tax bracket to the other.
For example, if one of you is a basic rate tax-payer and
the other does not pay tax, you can keep all your savings in the name of the non-taxpayer and enjoy tax-free interest on it all - providing the interest earned does not take them over the taxable income threshold).
If you hand over your savings to your spouse to benefit from the tax break, you would need to trust them with your money completely.
Likewise, if one of you is a higher rate tax-payer and the other basic-rate, you can apply the same rules and take advantage of the rate of tax of the lower rate tax-payer.
As such, after you get married it is definitely worth looking into transferring any savings the two of you have into an account that will be taxed at the lowest possible rate.
Do you need to update your will?
As soon as you get married, your existing will becomes automatically invalid. You will need to look into setting up a new will, which could name your spouse as your primary beneficiary.
It may also be a good idea to look into getting life insurance now if you are not already covered, particularly if you have a financial commitment that one spouse would not be able to meet on their own, such as a mortgage.
How will your credit record be affected?
Contrary to popular belief, getting married does not affect your credit report.
Being 'financially associated' means you will both leave a record on each others credit history showing that you have had a financial relationship together. While saying your vows ties you together in many ways, it does not create a financial association between the two of you.
The main thing that creates a financial association between two people is applying for a joint credit agreement such as a joint current account, mortgage or loan. You are therefore likely to be financially associated with your other half even before you get married if you have ever taken out any form of credit agreement together.
However, changing your marital status will not have any significant effect on your credit history.
Changing your surname may have a temporary impact on your credit record though, so make sure to include your old and new surname on any future credit applications.
Doing this will allow lenders to find your full credit profile, as the following short video from the credit experts at Experian explains.