Finance

Even without marrying or forming a civil partnership, we tie ourselves to the fortunes of our partners

Married couples have a legal duty to support each other. Cohabiting couples do not

Managing your finances and planning your life together is rarely as simple as pooling everything you earn and dividing up bills. Sorting out ‘my’ money from ‘our’ money is a common issue for couples. And then there is the matter of ensuring you receive all that you are entitled to, whether you are together or end up living apart.

Your financial situation as a couple will be different according to whether you are married, civil partnered, or not. Whereas married or civil partnered couples have a legal duty to support each other, cohabiting couples do not – including after a split.

Working out a budget can help you keep track of the money you have coming in and how much you spend. A budget planner can be found on the Money Advice Service website.

More information on benefits, taxes and managing your money can be found on the Directgov website.

Banking

Not married or not civil partnered

Separate accounts

If you are not married or not in a civil partnership, and you and your partner have separate bank accounts, neither of you can have access to money held in the other’s account. If one of you dies, any funds in the account will become part of the estate and cannot be used until the estate is settled.

Joint accounts

If you have a joint account, you both have the right to access the money in the account. Even though you are unmarried or not civil partnered, if one of you should die, the whole account would immediately become the property of the other.

If you are the only one putting money into the joint account, the strict legal position is that the money and any purchases you make from it ultimately belong to you.

Married or civil partnered

Separate accounts

If you are married or civil partnered, and have separate bank accounts, you cannot access money in your spouse’s or partner’s account without their permission. If one of you dies, the account would become part of the inheritance acquired automatically by your spouse or civil partner, unless a will instructs a different course of action.

Joint accounts

If a married or civil partnered couple has a joint bank account, the money, including any debts or overdrafts, is owned jointly regardless of who put it into (or took it out of) the account. On the death of one partner, the whole account immediately becomes the property of the other.

Debts

Even without marrying or forming a civil partnership, we tie ourselves to the fortunes of our partners in many ways over time. For example, if your partner cannot pay his or her share of the joint mortgage or rent, then that responsibility falls to you. But whether you are married, in a civil partnership, or not, you are not responsible for the debts your partner incurs in his/her separate name.

Always take advice early if there are any debts, whether from a Citizens Advice Bureau or a debt counselling agency, or in some circumstances from an insolvency practitioner (someone qualified to handle formal insolvency procedures). Or alternatively, contact National Debtline (free phone 0808 808 4000).

Not married or not civil partnered

Separate bank accounts

If you have separate accounts, liability for any debt or outstanding loans rests solely with the person named on the account.

Joint bank accounts

Things may become more difficult if you are not married or not civil partnered. To close a joint account, banks require the consent of both parties. If the account is not officially closed by both parties this could mean that one of you could run up an overdraft and leave the other responsible for it.

Credit Card or Personal Loan

You are liable if a credit card is in your name, even if your partner is a “named user”. If the card is held jointly, then you are both liable.

If you take out a loan agreement with your partner, you are both responsible for repaying the borrowed amount.

Married or civil partnered

If your partner has debts in his or her separate name, you are not responsible for them. Debts and overdrafts relating to a joint bank account will be the responsibility of both or either partner individually.

Taxes

Not married or not civil partnered

If you and your partner live together as a couple, but are not married or not civil partnered, you are treated as two separate individuals. This makes a difference to how you are taxed. Married couples and civil partners have certain advantages because they are given tax exemptions for Capital Gains Tax and Inheritance Tax.

As an unmarried or uncivil partnered couple you may be liable for:

  • Capital Gains Tax: This tax applies to the profit made when one of your assets is “disposed” of (sold or transferred or given away). Everyone has an annual allowance before this tax applies: £10,100 in the tax year 2010-11 and £10,600 in 2011-12. If, as an unmarried couple or uncivil partnered couple, you make a transfer of assets between you, once the annual allowance of £10,100 is exceeded the tax applies.
  • Inheritance Tax: This is a complicated tax which is not easily understood, even by some “experts”! It applies to the value of an estate when the owner dies. It is charged in two bands: below £325,000 (in 2011-12) is charged 0% tax; any assets above £325,000 are taxed at 40%.

More information on inheritance, tax and living together can be found in an Advicenow guide.

Although it is not possible to avoid these taxes completely, if you are not married or are not civil partnered, there are ways of arranging your assets in such a way as to make your liability less. Consider taking advice from an accountant or solicitor about the best way of arranging your financial affairs.

Married or civil partnered

As a married or civil partnered couple you can:

Transfer assets between you without having to pay Capital Gains Tax, and inherit assets from each other without having to pay Inheritance Tax, which can be a large amount of money if a house is part of the inheritance.

Tax credits

There are two types of tax credits: Working Tax Credit and Child Tax Credit.

Tax credits can provide extra financial support for eligible individuals and families, whether married, civil partnered or not. For more information, go to ‘benefits’.

Useful contacts

HM Revenue & Customs

If you have any questions about National Insurance call the National Insurance helpline on 0845 302 1479. The lines are open Monday to Friday 8am to 5pm.

For information on Working Tax Credit and Child Tax Credit call 0345 300 3900 or textphone 0345 300 3909.

Benefits

A range of benefits are awarded to eligible individuals and families without taking marital status into account. For example, Child Benefit is a regular payment that is not affected by marital status, income or savings, and is available to most people bringing up a child.

Tax credits – Working Tax Credit and Child Tax Credit – are also worked out without asking you whether you are married, civil partnered, or not.

But if you do marry or register a civil partnership you may qualify for other benefits that are not available to unmarried or uncivil partnered people, such as widow’s benefits.

There is a wide variety of financial help and welfare benefits. You should talk to an experienced adviser, for example at your local Citizens’ Advice Bureau or a local authority financial advisor.

A guide on benefits and living together is available at Advicenow.

An ‘A to Z’ of benefits can be found on the Community Care website.

More information and advice on benefits can be found on the Citizens’ Advice Bureau website.

Useful Contacts

Tax Credits helpline – call 0845 300 3900 or textphone 0845 300 3909

Child Benefit Office helpline – 0845 3021 444

Job Centre (work related benefits)

Benefits and Work

Information and advice on money, tax and benefits from DirectGov

HM Revenue & Customs

Pensions

Not married or not civil partnered

People who are not married or not civil partnered and live together as a couple are in a vulnerable position when it comes to pensions. Employers who give pensions or death-in-service payments to spouses or civil partners most often do not recognise partners who live together. But things are changing and a few pension companies have shown flexibility. The most important thing you or your partner can do is to name each other as the person you want to benefit from the policy.

Advicenow has produced a guide on pensions and living together.

Married or civil partnered

Although the rules vary between pension companies, spouses or civil partners are entitled to inherit pension rights on the death of their husband, wife or civil partner.

Useful contacts

Government Departments

Department for Work and Pensions

The Pension Service

HM Revenue & Customs

Pensioner organisations

Counsel and Care; Counsel and Care advice line: 0845 300 7585

Age UK; Age UK advice line: 0800 169 6565

Private pensions

Financial Services Authority

The Pensions Regulator

The Pensions Advisory Service; or call: 0845 601 2923)

www.unbiased.co.uk – The home of professional advice

The legal information on this page was checked by Langleys Solicitors.