Your marital status - whether or not you are married or in a civil partnership - can make a considerable difference to your tax position.

In its election manifesto, the Conservative Party proposed recognising 'marriage in the tax system' by allowing up to £750 of unused personal allowance to be transferred between spouses and civil partners if the recipient is a basic rate taxpayer. The idea worth a token £150 a year - could still see the light of day as the Liberal Democrats have agreed not to oppose it.

Marriage is already a factor in tax planning and can be an advantage or a drawback. Married couples can transfer assets to each other with no capital gains tax (CGT) implications, as long as they are living together during the tax year in which the transfer takes place. Using the exemption, a couple could transfer a valuable asset into their joint names before its ultimate sale, so that they can each use the CGT annual exemption (£10,100 for 2010/11) against their own portion of the gain.

One disadvantage of the marriage is that there can be less CGT exemption for homes that a couple own together or separately. An unmarried couple can have two exempt residences, but a married couple can only have one CGT exempt home at any one time. You have two years from the date of your marriage to choose which one of your residences will be your CGT exempt home, but this residence must be occupied for at least some of the time.

Spouses or civil partners can save a considerable amount of inheritance tax (IHT). Couples can normally leave their entire estates to each other free of IHT. Then, when the surviving spouse dies, the estate will benefit from not just one nil rate band of £325,000 but two, because the other spouses' tax-free amount should also be available. Therefore a wealthy person marrying someone with no assets can benefit from an additional tax-free amount of £325,000, which at 40% is a tax saving of £130,000.

However, there is a restriction where the spouse who receives a transfer is not domiciled in the UK. In this case, the maximum IHT exemption for lifetime and death gifts from the UK domiciled spouse is only £55,000. A non-UK domiciled individual may become domiciled in the UK for IHT purposes once they have been resident in the UK for at least 17 tax years, at which point the £55,000 limit is removed, though it continues to apply for earlier gifts.

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