- Taylor Swift and Travis Kelce are said to be getting married on 3 July
- The average wedding now costs £20,700*
- However, getting married brings financial benefits which can repay the cost of the big day ten times over
Sarah Coles, head of personal finance at AJ Bell, comments:
“Taylor Swift and Travis Kelce are rumoured to be getting married shortly and blowing millions of dollars in the process. It’s hard to know how many of the rumours are true, but it’s not impossible to imagine this kind of outlay, especially given that the average couple spends £20,700 on a wedding.
“When you’re forking out a fortune for a single day, you’d be forgiven for wondering whether it’s worth all the expense. The good news is that on a purely financial basis it probably is. A married couple may be able to save £1,169 a year as a result of tying the knot, so if they’re married for 53 years, they could cover the cost of the wedding three times over. On death, they might save another £270,719, so all in they could end up £311,976 better off than their unmarried counterparts.”
The financial perks of marriage
- The marriage allowance
“If one of you is a non-taxpayer and the other is a basic rate taxpayer, the non-taxpayer can give their spouse £1,260 of their personal allowance each year. This isn’t a massive saving in any given year (£252), but when you first apply, you may be able to backdate the claim for up to four years.”
Potential saving: someone making their first claim this year and backdating for four years could save £1,260.
- Tax perks on gifts to your spouse
"If you aren’t married and you give someone some of your investments, the gains you’ve made since buying them will be assessed, and if the total gain on the gift takes you over your annual allowance of £3,000, there’ll be capital gains tax to pay. If you’re married, passing investments between a couple won’t trigger a tax bill, so you can give them investments and when you sell up, you can both use your capital gains tax allowances. Alternatively, if they hang on to the gift, you can both receive dividends up to the annual dividend allowance without paying tax.”
Potential saving: If you need to realise investment gains of £6,000 and you’re a higher rate taxpayer, a married person could transfer half to their spouse, they can both sell them within their annual allowances, and there would be no tax to pay. An unmarried person would pay £720 in capital gains tax.
- Two sets of ISA and pension allowances
“Being able to transfer assets without worrying about tax means you can give gifts to your spouse, and you can put £20,000 each into an ISA in the current tax year, so investments are protected from capital gains tax and dividend tax, and savings are protected from income tax. You can also both pay into a pension and get tax relief up to your annual allowance (for most people that’s either £60,000 or their annual earnings – whichever is lower, while for non-earners it’s £3,600).”
Potential saving: This varies dramatically, but as an example, an unmarried higher-rate taxpayer with £40,000 in savings - keeping £20,000 in a Cash ISA and £20,000 in a savings account paying 4.85%, would make £992 in interest outside the ISA and pay £197 tax on it. If they were married, they could give £20,000 to their spouse so the full £40,000 could be put into Cash ISAs and there would be no tax to pay on interest.
- An extra ISA allowance on the first death
“If one of a married couple holds ISAs when they die, their spouse gets a one-off ISA allowance which matches the value of those ISAs. It means they can wrap savings and investments in this ISA wrapper, and protect them from tax. An unmarried couple doesn’t get this benefit, so would have to use that year’s ISA allowance.”
Potential saving: If a married person died with £70,000 in ISAs, their spouse would get an extra £70,000 ISA allowance. If the surviving half of the couple had £70,000 in savings, they could wrap them all in a Cash ISA immediately and pay no income tax on the interest. If an unmarried person inherited £70,000 in savings, and wrapped £20,000 in that year’s ISA allowance, they might then save the rest outside of an ISA. If they earned 4.5%, they’d make £2,297 in interest, and a higher rate taxpayer could face a bill of £719.
- Inheritance tax breaks
“Everyone has a nil rate band that means they can pass on up to £325,000 free of IHT. They may also have the £175,000 residence nil rate band, which applies if you give your main home to your direct descendants – most commonly children or grandchildren. It means you can leave up to £500,000 without worrying about tax.
“If you’re married or in a civil partnership, everything you leave to your spouse is free of IHT too. It means the first of a couple to die can leave everything to their other half and have no tax to pay. Then when the second of the couple dies, their estate can use any of their partner’s remaining nil rate bands.”
Potential savings: A married couple with assets of £500,000 each – at least £350,000 of which is a property – can leave everything to their surviving spouse on the first death so there’s no inheritance tax to pay. On the second death, there are two people’s nil rate bands to use, so the first £1 million of their estate could be free of inheritance tax.
If you are an unmarried couple with the same wealth, leaving everything to the surviving partner might cost £70,000 in inheritance tax on the first death. If the value of the estate grew to £1 million by the time of the second death, even if the home is left to children, there could be another £200,000 to pay. It means being unmarried could cost this couple’s estate £270,000.
*Source: Pocketwise
