Older Brits Consider Marriage to Dodge Inheritance Tax Hike

Brits Consider Marriage to Avoid Inheritance Tax Hike

With the recent budget announcement freezing inheritance tax allowances and subjecting pension pots to the tax from April 2027, many older Brits are considering marriage as a way to mitigate the financial impact. Financial advisors report an increase in inquiries from clients about the implications of these changes, particularly regarding the benefits of being married.

The budget changes have strengthened the case for marriage as spouses can still pass assets to their surviving partner without incurring inheritance tax. This exemption applies to all assets, including those affected by the pension pot changes.

While marriage rates have been declining in recent years, with only 49.4% of over-16s in England and Wales married or in a civil partnership in 2022, the potential tax implications may lead to a reassessment among older couples.

Financial advisors are also discussing the benefits of civil partnerships, which offer the same legal rights and duties as marriage. However, it's important to note that marriage doesn't completely solve the inheritance tax issue, as the surviving spouse may face higher tax liability upon their own death.

For unmarried couples, the issue of inheritance tax could arise on the first death, potentially leading to greater exposure than would be the case for married couples. This has prompted some older couples to consider marriage as a way to address this concern.

Financial advisors recommend that married couples review their pension death benefit nominations to ensure they are optimized for inheritance tax purposes. It's generally advisable to stipulate that the pension is paid in total to the surviving spouse upon death, rather than dividing it among other beneficiaries.

Overall, the recent budget changes have led many older Brits to reconsider their relationship status and explore the potential benefits of marriage or civil partnership in mitigating inheritance tax liabilities.