We all know that tying the knot can affect your day-to-day money management, but exactly what effect does being a Mr & Mrs 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 tax incentives and other financial implications to make becoming a Mr & Mrs all the rosier. Married couples used to be viewed by the Government as one single taxable entity and so you would be taxed less on getting married.
However the picture is different today: even when joined to another in matrimony we are now all seen as individuals to be taxed individually, meaning the tax benefits are few and far between.
However there are some important things to note that will affect your finances when you say ‘I do’ – we take a look at them.
How will my tax status be affected?
First of all, it’s important to note that you will have to make sure to inform your local tax office of your new marital status.
While the most notable tax ‘perk’ of getting married used to be the Married Couple’s Allowance, this was abolished on the 6th April 2000 and you now only qualify for it if you marry someone who was born before 6th April 1935.
Its replacement was the new Child Tax Credit which provides a benefit to those married couples who decide to have children.
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 my 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 doesn’t pay tax, you can keep all your savings in the name of the latter and enjoy tax-free interest on it all (providing the interest earned doesn't take them over the taxable income threshold).
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 lower rate if this is possible. Of course, you would be handing over your savings to your spouse so you would need to trust them with your money completely.
How will my will be affected?
As soon as you get married, any existing will you have will become automatically invalid and you will have to look into setting up a new will which will name your spouse as your primary beneficiary.
Anything you leave to your spouse in your will will be tax-free. It may also be a good idea to look into getting life insurance now if you aren’t already covered, particularly if you have a financial commitment that one spouse wouldn’t be able to meet on their own such as a mortgage.
How will my credit score be affected?
Contrary to popular belief, getting married does not in itself affect your credit score in any way. While saying your vows ties you together in many ways, it does not in fact create a financial association between the two of you. Being ‘financially associated’ means your partner’s credit score will have a bearing on yours and vice versa.
The only thing that creates a financial association between two people is a joint credit agreement such as a joint current account, joint savings account, mortgage, joint loan, and so on. As such you are 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. Changing your marital status from ‘Single’ to ‘Married’ won’t in itself have any significant effect on your credit score.
