TIPS FOR MARRIED COUPLE TAX PLANNING IN THE UK

Our clients are aspirational. They work hard to progress in their careers. With that progression comes increased responsibility at work, increased remuneration, but sadly, also increased income taxes. 

Add parenting responsibilities into the mix, and suddenly the to-do list is overwhelming. At Sadler Advisory, our role is to help, at the very least, with the tax part of your life.

One area that regularly comes up in conversation is the financial benefit of getting married or entering into a civil partnership. Beyond the emotional and social reasons for tying the knot, many couples ask, ‘’is there a tax advantage to being married?’’. And, more cynically, is it worth it?

MARRIAGE ALLOWANCE – HOW IT WORKS

Marriage allowance is a tax break that allows one spouse or civil partner to transfer up to £1,260 of their personal tax allowance to the other. This is only available if:

• One partner earns less than the personal allowance (£12,570 in 2024/25), and

• The other pays basic-rate income tax (i.e. earns less than £50,270).

If you meet the criteria, you could reduce your overall tax bill by up to £252 a year. Not a bad saving, but let’s be honest, it’s not exactly life-changing either.

Now, compare that to the average cost of a wedding in the UK, which currently stands at a whopping £23,000!  At that rate, it would take over 90 years to recoup the cost of your big day through the marriage allowance alone.

Still want to justify it for tax reasons? Perhaps it’s time to consider a more budget-conscious option. You can, in fact, get married at a registry office from as little as £57, which would give you a far better return on investment if you’re looking at marriage from a financial perspective. Oh, and that could still include a slap up meal for you and your ‘lucky’ new life partner. 

THE HIDDEN TAX TRAPS FOR HIGHER EARNERS

If you and your partner are both progressing in your careers, it’s very possible that one or both of you might cross the £100,000 income threshold. Here’s where things get more complicated, and more punitive.

When your salary exceeds £100,000, you start to lose your personal allowance (£12,570). That means every £1 you earn between £100,000 and £125,140 is effectively taxed at 60%. There’s no “official” 60% tax rate published anywhere on HMRC’s website, but this is what’s really happening.

Childcare benefits disappear too!

That’s not all. Once either partner earns above £100,000, you also lose:

• Tax-Free Childcare (worth up to £2,000 per child per year), and

• 30 Hours Free Childcare (if applicable).

This can represent a significant financial blow for working families, especially those juggling high-earning roles with expensive childcare costs.

CHILD BENEFIT AND THE HIGH-INCOME CHILD BENEFIT CHARGE (HICBC)

It’s not just free childcare and tax allowances that are on the line. Once one parent’s adjusted net income exceeds £60,000, you’ll also be hit with the High Income Child Benefit Charge.

It works as follows:

• Between £60,000 and £80,000, you still receive Child Benefit, but you’ll have to pay back a portion of it through your Self Assessment tax return.

• At £80,000 or more, you effectively lose 100% of your Child Benefit entitlement. You’ll still receive it unless you opt out, but you’ll be charged the full amount back in tax.
  

The highest earner in the household is responsible for repaying the charge, regardless of who actually claims the benefit.

This is a frustrating trap for many parents, especially because you can’t go back and reclaim Child Benefit if you didn’t opt in at the time. If you're not sure what your income will look like for the year, it might be worth claiming it anyway, keeping the funds aside, and repaying what’s necessary later via your tax return.

AN IMAGINARY REAL-LIFE SCENARIO

Let’s use a hypothetical story to illustrate how this could work in reality. It reflects a common situation for many of our clients:

We recently worked with a couple, both aged between 38 and 42, with two young children. They had both crossed the £100,000 threshold, on paper, they were doing well. But they found themselves in a situation where, despite working harder and earning more, they were taking home less per £1 earned.

They had lost their tax-free childcare benefits, were being hit by the 60% tax trap, and were starting to question the point of all their efforts.

We stepped in and helped them plan their earnings for the 2024/25 tax year. With a clear understanding of their projected income, lifestyle costs, and cash reserves, we were able to recommend a pension contribution strategy.

This approach:

• Reduced their effective tax burden

• Helped them regain access to lost childcare benefits

• Allowed them to retain more of their earnings

(Note: investments in pensions can go up and down in value. We present the tax-saving options, investment decisions are always down to you.)

SO... SHOULD YOU GET MARRIED FOR TAX REASONS?

In short, probably not.

Marriage allowance is a nice-to-have, but it’s unlikely to make a big difference unless one of you is earning significantly less. Meanwhile, higher-income couples may find that being married makes little difference to their tax position, or even complicates things, especially if you don’t plan strategically.

That said, marriage or civil partnership can be useful when it comes to:

• Inheritance tax planning

• Transferring assets between spouses (usually tax-free)

• Making pension planning and estate planning more efficient

So if you’re already married or planning to tie the knot anyway, it’s definitely worth getting advice to make sure you’re making the most of the tax benefits available to you.

Contact us to discuss your options