The Marriage Dividend
Cohabiting couples face a range of tax and finance challenges, says Paul Lewis.
New official figures show that nearly one in four couples in England and Wales who live together are not married nor in a civil partnership. The 6.8 million people in cohabiting couples, including 2.6 million aged 40 or more, are taking big financial risks from which married couples or civil partners are protected.
SEPARATION
When married couples and civil partners in England and Wales break up, they normally each get half of all property and money owned by the other, including the value of any pensions due from past employment. This does not apply to separating cohabitees. One of them may be able to argue in court for a share from the other, but the process is difficult and uncertain. The law in Scotland does give some rights to separating cohabitees but not equality with married couples.
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DEATH
People in a married or civil partnered couple can leave all their money and property to their spouse free of Inheritance Tax. Cohabiting To receive emails with our latest news and offers, visit radiotimes.com/email couples cannot do this. When one dies, their partner is liable for tax at 40% on anything they leave over £325,000. In some parts of the UK that is less than the value of a typical home. Any children may suffer, too: when a widow (including widower or bereaved civil partner) dies, their heirs normally benefit from double allowances before Inheritance Tax is due. No such doubling occurs on the death of the second cohabiting partner.
Unmarried partners with children can now get bereavement support payments totalling £9,800 if they are under pension age when their partner dies. But if they have no children, they are not entitled to the £4,300 payments that a childless widow or bereaved civil partner is entitled to.
TAXES
A married or civil partnered couple where one has an income too low to pay income tax can save their spouse up to £252 tax a year by transferring some of their tax-free personal allowance to the other. (One piece of good news for some unmarried couples: those with two homes are not liable for Capital Gains Tax if one of the homes is sold; a spouse would be liable.)
