With this ring, we shall be taxed

Two live as cheaply as one? It doesn't always work that way

THE Archbishop of York last week attacked government tax rules which he claims are a disincentive to get married. In a television appeal, Dr John Habgood said that in recent years legislation had gone too far in efforts not to disadvantage the illegitimate, and to treat cohabiting couples generally as if they were married.

``Those who are looking at the possibilities of different lifestyles see no particular interest for themselves in actually getting married,'' he said.

With the ever-increasing trend towards cohabiting outside wedlock, tax and benefits policy has indeed been moving to a more neutral stance. Inconsistencies remain, however, in the fiscal and benefit treatment of married and unmarried couples. Some inducements remain for couples to tie the knot. Other measures may encourage a couple not to do so.

Married couples' allowance, which provides extra tax relief for couples who formalise their commitment to one another, applies to £1,720 per annum of income, but the value of the allowance was slashed from 25 per cent to 20 per cent last April, and actually cuts bills this year by a fifth, or £344; and from this April benefit will be reduced to 15 per cent, worth just £258 a year. But unmarried couples have no such entitlement, unless they have children. Cohabitants with children, and lone parents, are entitled to additional person allowance, which gives the same level of help as the married couples' allowance.

Mortgage interest relief favours married couples if they purchased properties together after 1988, when Nigel Lawson abolished double taxation relief. Where the property is owned jointly by married couples, tax relief may be allocated flexibly between the partners. If owners merely cohabit, benefit is halved rigidly between them. If one partner does not work and the other pays all the mortgage, half the relief is lost.

On the other hand, if unmarried partners bought before the 1988 watershed, it may not be in their interest to marry now. In 1988 relief was switched from a maximum of £30,000 per individual owner living in a property to £30,000 total on the property itself. Couples who bought before the rule change maintain their separate relief, now at most £501. If they marry, they lose it.

When mortgage interest relief drops to 15 per cent in April however, maximum relief will fall to £375 a year, at current interest rates. So disparities to do with marital status will also narrow.

Married couples do better out of capital gains tax and inheritance tax rules, with tax-exempt transfers between man and wife. Couples with high financial gains can move assets between themselves to maximise CGT allowances - currently at £5,800 per person, rising to £6,000 next April. Common- law couples get no special CGT or inheritance treatment, and a partner can face heavy tax bills on the death of the other.

A further factor militating against couples getting wed is maintenance payments. These are subject to tax relief at the same level as the married couples' allowance. Relief is withdrawn, however, if the person receiving maintenance remarries.

The DSS also ensures that there are no advantages in having a marriage certificate if claiming income support, family credit, or related benefits. ``Our definition is if you're living with someone, they are considered your partner,'' said Richard Brooks, a spokesman.

In fact, when people live together as partners the income support bill falls from £45.70 each (for individuals over 25) to £71.70 total, the couple's rate.

Family credit payments do not discriminate between two-parent and lone- parent families. State pensions, however, penalise unmarried women when their partners die. These pensions recognise a woman's entitlement to continued payment of a spouse's pension only if the couple were man and wife. Similarly, only married women are eligible for widows' benefits, though there is now a similar entitlement for widowers.

News
peopleFrankie Boyle responds to referendum result in characteristically offensive style
Arts and Entertainment
Highs and lows of the cast's careers since 2004
News
news
New Articles
i100... with this review
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam