In this article
Capital gains tax
Capital gains tax is applicable to any profit made when you ‘dispose’ of an asset that has increased in value. Disposing of an asset can include selling, transferring, gift giving, swapping, and insurance payouts.
Unmarried couples benefit from ‘private residence relief’, also known as ‘principal property relief’. This is a tax relief for individuals who sell their main residence and removes the capital gains tax paid on the sale.
This means that each person can individually own and sell their property. There are criteria to meet, so make sure you research this or speak to a financial advisor.
There are financial benefits of marriage for the purpose of capital gains tax. Married couples are automatically classed as living together, so they can only benefit from private residence relief on one property.
As a married couple, you can combine your capital gains tax allowance for all joint assets, increasing the tax threshold. You can also transfer part of your assets to your spouse to benefit from their capital gains tax allowance.
Inheritance tax is applicable to the estate of someone who has passed away. An estate typically includes money, property, and belongings (for example jewellery, artwork etc.).
For unmarried couples, the 40% inheritance tax applies on anything over the threshold of £325,000.
Married couples will automatically receive their partner’s entire estate even if there is no will in place through the rules of intestacy. If the person who passes away has children, the children will also automatically inherit part of the estate according to intestacy rules.
Typically, when a spouse inherits their partner’s estate as a gift, no inheritance tax applies which is one of the biggest financial benefits of marriage. This is known as spousal exemption. This only applies to UK-domiciled couples. If one spouse is based in the UK and the other is not, this exemption is limited.
Spouses can combine their inheritance tax, meaning when the second spouse passes away, the threshold on their estate is £650,000.
If a married couple owns a property, they can benefit from a further allowance which if unused can be transferred to the surviving spouse on death. This further tax relief can ringfence up to £1millon of the couple’s estate. This potentially saves the inheritor thousands of pounds in taxes!