Want to cut your tax bill?

Oscar Wilde famously quipped that marriage was “the triumph of imagination over intelligence” and second marriages were “the triumph of hope over experience”. How he would have described third, fourth and fifth attempts at matrimony we can only guess.

But whatever the motivation for those who do - like media magnate Rupert Murdoch who is about to enter into his fifth marriage at the age of 93 - there are undoubtedly some financial reasons for matrimony that those who get hitched - and who manage to stay that way - can benefit from.

Tax and romance may not traditionally go hand in hand, but the fact is that marriage can be incredibly tax efficient. The following also applies to couples in civil partnerships.

When it comes to income tax

While we each have our own personal tax allowance, which allows us to earn a certain level of income before we have to start paying tax, married couples can utilise a nifty little thing called the Marriage Allowance to boost the proportion of their income that remains tax-free.

If you’re a basic rate taxpayer and your spouse is a non-taxpayer, or earns less than £12,570 in the current tax year, then they can transfer £1,260 of their tax-free allowance to you; saving you as much as £252 a year in income tax.

Take a look at HMRC’s Marriage Allowance calculator to work out how much you can save.

There is also something called the Married Couples Allowance, which is totally different and which applies if one of you was born before 6 April 1935. This enables you to reduce your tax bill by between £401 and £1.037.50 a year.

If you run your own business you can cut your tax bill by ‘sharing’ your earnings with your spouse.  If you make them a fellow director in the business - even if they don’t actively carry out a business function in return for the money they receive - you can legitimately make the most effective use of your personal allowances and ensure more of your earnings fall into the non-taxpayer or at least basic taxpayer bands.

HMRC has clamped down on how much income you can take in the form of dividends, but by utilising your couple power you can double up at least.

You each have a dividend allowance, which is £1,000 in the 2023-24 tax year. The dividend allowance was £2,000 each from 2018/19 to 2022/23, so it’s less valuable than it was, but again at least you get to double-up as a couple. You don’t pay tax on any dividend income that falls within your personal allowance, so £12,570 in the current tax year. You only pay tax on any dividend income above the dividend allowance.

When it comes to ISAs

Talking of doubling-up, you each have an ISA allowance which means double the potential tax-efficient savings within your ISA. We can each save £20,000 a year into an ISA. For couples it has become an even more valuable investment tool and could effectively be viewed as having the equivalent of a third annual pension allowance between you.

There is another important benefit with ISAs too and this is the ‘additional permitted subscription’ (APS). This allowance enables the surviving spouse to receive an APS equivalent to the amount held in the ISA at the time of death. This allowance is in addition to your own ISA allowance.

When it comes to pensions

You might be able to inherit an extra payment on top of your new state pension if you’re widowed.

You could inherit part of your deceased partner’s additional State Pension, which will be paid with your state pension, if your marriage or civil partnership with them began before 6 April 2016 and either they reached state pension age before 6 April 2016 or they died before 6 April 2016 but would have reached state pension age on or after that date.

If you and your partner reached state pension age before 6 April 2016, you’ll get any State Pension based on your husband, wife or civil partner’s National Insurance contribution when you claim your own pension. You won’t be eligible for it though if you remarry or form a new civil partnership before you reach state pension age.

If you reached State Pension age after 6 April 2016 you may be able to inherit an extra payment on top of your pension.

Contact the Pension Service to check what you can claim.

When it comes to your home

While each of us can inherit up to £325,000 before inheritance tax (IHT) becomes payable, married couples benefit from two special clauses.

Not only can you pass a home to your spouse or civil partner when you die without them becoming liable for IHT, no matter what the value of the property you leave them is, but if you leave your home to your children or grandchildren that threshold jumps to £500,000 each. This means you can, as a married couple, pass on property worth up to £1m completely IHT-free. This though only applies as long as your estate is worth less than £2m overall.

Combined, these perks, only available to married couples and those in civil partnerships, make matrimony a serious contender for romantic gesture of the year.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.