Cohabiting couples with children are the fastest-growing type of family in the UK. Between 1996 and 2016, the number of couples in this position increased from 1.5 million to 3.3 million. When you include unmarried couples with no children, they make up 9.5% of the population. However, the experts warn that there's no safety in numbers. You may consider yourself to be a 'common-law' husband or wife, but in law this counts for nothing.
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Worryingly, around half of cohabiting couples think that once they have been living together for three years, it gives them the same sorts of rights as married couples. In fact common-law marriage hasn't existed in England since the 16th century. It means that unmarried couples - regardless of whether or not they have children - may find themselves in an alarming position if their other half leaves them or dies.
Gary Smith, Chartered Financial Planner at Tilney, explains the tax position. "In reality, there may be very little difference in the lives of a married and cohabiting couple, but in the eyes of the government, only those who are married or in a civil partnership are viewed as one part of a whole for tax purposes, with the ability to share their allowances," he says.
This means they may be able to pay less income tax, if one half of the couple earns below the tax threshold (£11,000). They can transfer £1,100 of their personal allowance to their other half (assuming their spouse earns between £11,000 and £43,000). This, Smith says, could save them up to £220 in tax this year. If you were married during the 2015/16 tax-year, you can potentially backdate a claim to 6th April 2015, reducing the tax liability by up to £432.
Those who are selling assets - like big chunks of shares or a second property can also benefit. Normally you can make up to £11,100 before you pay tax on it. However, you can transfer assets between you and your spouse without paying tax, so you can make £22,200 before paying tax. In fact, Smith says, you could transfer the lot to the spouse who would get the lowest tax charge - saving thousands of pounds. He adds: "This option is not available to unmarried couples."
"The tax benefits of Marriage are not solely confined to the couple's lifetimes. In fact, perhaps the biggest financial gain comes in the event of death." Each individual has a £325,000 limit on the value of their assets they can leave before inheritance tax is due at 40% on the excess. However, you can pass everything to your spouse without any tax charge. You also pass your tax allowance, so that when they die they don't pay tax on any assets worth under £650,000. This could go up to £850,000 when the Residence Nil Rate Band is introduced in April. Unmarried couples don't have the opportunity to do any of this.
The other factor to bear in mind on death is that if you haven't made a will, then your assets will be divided according to the rules of intestacy. For married couples this will mean a spouse gets a significant portion of the estate (the first £250,000 and half of everything else in England and Wales). If you are unmarried, meanwhile you are not automatically entitled to anything. It's therefore essential that all couples and families have a will in place - but it is particularly vital for unmarried partners and parents.
You also need to know the rules on pensions. Smith points out that occupational pension schemes will often provide a spouse's pension of around 50% of the original. In some instances a partner can be nominated as a beneficiary. However, if you do not nominate the partner they will not be entitled to anything. Conversely, some schemes will insist you are married in order to take advantage.
In the event of a split, things become more complicated for unmarried couples too. Alison Hawes, family lawyer at Irwin Mitchell Private Wealth, says "Unmarried couples who split up face issues that can be more complicated than a divorce when children and property are involved. People who live together do not have the same rights as people who are married or have a civil partnership, and many of our clients are astounded when they realise that they have few legal rights when a relationship breaks up. We have seen examples where people are literally left out in the cold because they have been evicted from a house that they shared with a partner for many years."
If you are married, then regardless of who owned the property when you got married, or who pays the mortgage, you both have a legal right to live there in the event of a divorce. It doesn't guarantee that it will be equally split, but the law is designed not to make one or other of you homeless.
If you are unmarried, then it depends to a large extent on who owns the property. If you move into your partner's home and then break up, they have the right to ask you to leave. If you have children, or have made a significant contribution to the property - either financially or by working on the property - then the rules are slightly different. In the case of children, the property may be transferred into the name of the main carer until the child is 18. If they have contributed to the property, a court may assign some of the value to them.
If you are buying together, it is therefore essential to ensure you own the property together.