Finances: planning for the future
Although money isn’t the most romantic topic, it’s an unavoidable part of any relationship. Your financial situation as a couple differs depending on whether you are married, civil partnered, or not. Married or civil partnered couples have a legal duty to support each other but cohabiting couples don’t, even after a separation.
Working out a budget can help you keep track of the money you have coming in and how much you spend. You can find a budget planner on the Money Advice Service website.
Separate bank accounts
If you are not married or civil partnered, you won’t be able to access money held in each other’s separate bank accounts. If one of you dies, any money in the account will not be available until the estate is settled.
If you are married or civil partnered, you can only access money in your spouse’s or partner’s account with their permission. If one of you dies, the account becomes part of the inheritance and automatically goes to a spouse or civil partner, unless the will says otherwise.
Joint accounts
If you have a joint account, you both have the right to access the money. If one of you dies, the account immediately becomes the property of the other, even if you are not married or civil partnered.
If you are the only one putting money into the joint account, the money and any purchases you make from it legally belong to you.
If you have a joint bank account with your spouse or civil partner, the money - including any debts or overdrafts - is owned jointly, regardless of who has been paying money in, or taking money out. If one partner dies, the account immediately becomes the property of the other.
Debts
Whether you are married, in a civil partnership, or not, you are not responsible for any debts in your partner’s name, including in their separate bank account. If you do have debts, always take advice as soon as possible. You can speak to Citizens Advice or a debt counselling agency such as the National Debtline (0808 808 4000). In some circumstances, you may need to contact an insolvency practitioner.
If you have a joint bank account, things may be more difficult if you are not married and not civil partnered. To close a joint account, you both need to give consent. If the account is not closed, one of you could run up an overdraft and leave the other one responsible for it.
If you have a joint mortgage or rent, you are legally responsible for covering each other’s share.
Real couples tell their debt stories on our debt and relationships site. Visit the site to see our short animations and expert advice.
Credit cards and personal loans
If a credit card is in your name, you are liable for the payments, even if your partner is a named user. If you hold the card jointly, then you are both liable.
If you take out a loan with your partner, you are both responsible for repaying the borrowed amount.
Taxes
If you and your partner live together and are not married or 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 applies to the profit made when you sell or give away an asset, which can include property or possessions worth over £6,000. Everyone has an annual allowance of £11,300 (as of 2017). Beyond this allowance, if you want to transfer assets to your partner, you will be charged Capital Gains Tax if you are not married or civil partnered.
Inheritance Tax: This applies to the value of an estate when the owner dies. It is charged in two bands: Assets below £325,000 are charged 0% tax and assets above £325,000 are taxed at 40% (2017). Married and civil partnered people can transfer this to a partner after they die, effectively doubling the threshold to £650,000.
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.
Although it isn’t possible to avoid these taxes completely, there are ways of arranging your assets to lessen your liability, even if you are not married and not civil partnered. You can ask an accountant or solicitor about the best way to arrange your financial affairs.
Benefits and tax credits
Some benefits are awarded regardless of marital status. For example, Child Benefit, Working Tax Credit and Child Tax Credit are not affected by marital status, income or savings. Other benefits, such as widow’s benefits, are only available to people who are married or civil partnered.
Pensions
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.
People who live together and are not married or civil partnered are in a vulnerable position when it comes to pensions. Employers who give pensions or death-in-service payments to spouses or civil partners do not usually 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.
Useful contacts
Citizens Advice – legal rights and advice
HM Revenue & Customs – UK tax authority
Jobcentre Plus – work-related benefits
The National Insurance helpline – 0300 200 3519
Tax Credits helpline –0845 300 3900 or textphone 0845 300 3909
Child Benefit Office helpline – 0300 200 3100
Advicenow - guide on tax, benefits, and living together.
Community Care - an ‘A to Z’ of benefits.
The Pensions Advisory Service – free and impartial pension advice
Unbiased – professional and legal advice service database
The legal information on this page was checked by Langleys Solicitors, and updated in 2017.
