Getting married changes your legal and financial position significantly — and so does separating or divorcing. From tax allowances to inheritance rights, pension sharing to property ownership, understanding the financial consequences of marriage and divorce helps you make better decisions at every stage.
This hub covers the key financial impacts of marriage, civil partnership, separation, and divorce in England and Wales.
How Marriage Changes Your Finances
1. Marriage Allowance
If one spouse earns less than the personal allowance (£12,570 in 2026/27) and the other pays basic rate income tax (20%), the lower earner can transfer £1,260 of their personal allowance.
| Before Marriage Allowance | After Marriage Allowance | |
|---|---|---|
| Lower earner’s personal allowance | £12,570 | £11,310 |
| Higher earner’s personal allowance | £12,570 | £13,830 |
| Tax saving (20% × £1,260) | — | £252/year |
You can backdate a claim for Marriage Allowance up to 4 tax years — a potential £1,008 lump-sum refund if eligible throughout.
The Marriage Allowance does not apply if the higher earner pays 40% or 45% tax — they already use their full allowance.
2. Inheritance Tax — Spouse Exemption
Assets passed between married spouses (or civil partners) are completely exempt from inheritance tax — no matter how large the estate. This applies both during lifetime and on death.
Furthermore, any unused nil-rate band (NRB) or residence nil-rate band (RNRB) from the first death can be transferred to the surviving spouse:
| Threshold | Per person | Married couple (combined) |
|---|---|---|
| Nil-rate band | £325,000 | Up to £650,000 |
| Residence nil-rate band | £175,000 | Up to £350,000 |
| Maximum combined | — | £1,000,000 |
A married couple leaving their home to children can pass up to £1,000,000 IHT-free. Unmarried cohabitants have no equivalent benefit.
3. Capital Gains Tax — Spousal Transfer
You can transfer assets to your spouse or civil partner with no capital gains tax — at the original base cost, not market value. This allows couples to use both partners’ annual CGT exemption (£3,000 each in 2026/27) and basic rate band.
Example: You own shares with a gain of £30,000. You transfer half to your spouse before selling. Each of you has a £15,000 gain — less £3,000 annual exempt amount = £12,000 each. You each pay 18% CGT (if basic rate taxpayers): £2,160 each = £4,320 total. Without the transfer, you would pay 24% on the full £27,000 gain = £6,480.
Note: this same-tax-year transfer benefit was expanded in April 2023 — the no-gain, no-loss treatment now also applies for up to 3 years after separation (see below).
4. Pension Benefits for Surviving Spouses
Most defined benefit pension schemes pay a survivor’s pension to a surviving spouse — typically 50% of the member’s pension. Defined contribution schemes allow the member to nominate the spouse to receive the death benefit, typically outside the estate.
For state pension: a surviving spouse may inherit a portion of their partner’s Additional State Pension or protected payment, depending on when both reached pension age.
Important: these benefits apply to spouses and civil partners. Unmarried partners may be included in many modern pension scheme rules, but it is not automatic — always keep nomination forms updated.
Joint Finances and Joint Ownership
Getting married does not automatically merge finances. You must actively choose joint accounts, joint mortgages, and joint ownership.
Property ownership: two options
| Ownership type | What happens on death | What happens on separation |
|---|---|---|
| Joint tenants | Surviving spouse automatically inherits 100% | Both own 50% — neither can sell without the other |
| Tenants in common | Each person’s share passes via their will | Each owns their stated share — can sell separately |
Most married couples use joint tenancy for the family home — automatic inheritance without probate. Tenants in common gives more control over who inherits (useful for blended families).
Cohabitation vs Marriage: The Key Gaps
Unmarried couples who live together — however long — do not automatically have the same rights as married couples:
| Right | Married spouse | Unmarried partner |
|---|---|---|
| IHT-free transfer on death | ✅ Yes — unlimited | ❌ No — standard NRB applies |
| Automatic inheritance without a will | ✅ Yes | ❌ No — intestacy gives them nothing |
| Marriage Allowance | ✅ Yes | ❌ No |
| CGT no-gain no-loss transfer | ✅ Yes | ❌ No |
| Survivor’s pension (DB schemes) | Usually ✅ | Depends on scheme rules |
| Right to remain in family home on death | ✅ Automatic | ❌ Only if named or via trust |
Practical steps for unmarried couples: Make wills, hold property as tenants in common with a declaration of trust, keep pension nominations current, and consider life insurance written in trust.
Divorce: The Financial Consequences
What can be divided?
England and Wales divorce courts can divide all matrimonial assets — assets accumulated during the marriage. This includes:
- The family home
- Savings, investments, and ISAs
- Pension funds (including defined benefit pensions)
- Business interests
- Inheritances (sometimes, depending on timing and circumstances)
Pre-marital assets are sometimes excluded, especially in shorter marriages. The court’s starting point is fairness — need typically takes priority over equal shares, especially where children are involved.
Pension sharing in divorce
Pensions are often the largest asset after the family home. Courts can issue:
- Pension Sharing Order (PSO): A defined percentage of the pension is transferred to the other spouse’s pension
- Pension Offsetting: One spouse keeps the pension; the other keeps other assets of equivalent value (e.g., a larger share of the house)
- Pension Earmarking: Rarely used — a proportion of pension income is paid to the ex-spouse when it comes into payment
Pension sharing requires a formal court order. The pension scheme implements it — creating a new pension credit for the recipient.
Capital gains tax on divorce
Since April 2023, separating spouses have up to 3 years after the tax year of separation to transfer assets between each other at no gain, no loss. Previously this was only allowed until the end of the tax year of separation — creating a cliff-edge.
Assets transferred as part of a formal divorce settlement under a court order are covered by no-gain, no-loss treatment indefinitely.
Making the settlement legally binding
A Consent Order is essential — it makes the agreed financial settlement a court order, preventing future claims. Without one, an ex-spouse could make claims years later (people have won pension claims 20 years after separation).
Without a Consent Order: Informal agreements are not enforceable — either party can later apply to court for financial remedy.
Articles in This Cluster
- Getting Married Financial Checklist — Money Steps Before and After the Wedding
- Divorce Financial Checklist — What to Sort Out When You Separate
Related Guides
- Inheritance Tax Guide UK 2026/27 — IHT thresholds and spouse exemption in full
- Marriage Allowance UK — How to Claim — step-by-step Marriage Allowance guide
- What to Do With Your Finances When Someone Dies — bereavement financial hub
- Capital Gains Tax UK 2026/27 — CGT rates and allowances