Most people decide to get married or to start living together for romantic reasons (you’d certainly hope so!) You might think they’re pretty similar in terms of your legal and financial rights, but they’re not. Find out how marriage, living together and civil partnership differ.
Marriage and civil partnership
If you get married, you have the same legal and financial rights as someone in a civil partnership. However, there’s a big difference between being married or in a civil partnership and living together. I’ve outlined some of the major ones.
There are some tax breaks that you can take advantage of if you’re married or in a civil partnership, which people who live together can’t. These are:
- Marriage allowance: If you’re married or in a civil partnership and one of you is a basic rate taxpayer and the other doesn’t pay tax, the non-taxpaying partner can transfer £1,250 of their personal allowance to the one who pays tax. This could save the taxpaying partner £250 a year in tax (in tax year 2019-20).
- Inheritance tax: Anyone (married or not) can leave up to £325,000 in money or property when they die, without there being any inheritance tax to pay. This amount is called your ‘nil rate band’ or ‘inheritance tax allowance’. This figure could be higher if the person owns their home and leaves it to their children or grandchildren. But couples who are married or in a civil partnership can also leave as much as they want to each other when they die and there’s no inheritance tax to pay at all. Also when the second spouse/ civil partner dies, any unused inheritance tax allowance from the first can be transferred to them, potentially reducing any inheritance tax bill.
- Capital gains tax: Couples who are married or in a civil partnership can give each other assets – money, investments etc – without either of them having to pay capital gains tax. Couples who live together can’t do this.
The rules on state pensions and when a surviving spouse or civil partner can inherit changed for those reaching state pension age after April 5th 2016. Before then, widows could apply to use their late partner’s National Insurance record instead of their own, for their basic state pension entitlement. Civil partners and widowers reaching state pension age after April 6th 2010 but before April 6th 2016, could also do this. In reality, it was most useful for widows, because men were far more likely to be entitled to a full basic state pension in their own right.
SAVVY TIP: Under the old state pension system, you could also build up an additional state pension which was, in broad terms, linked to your earnings. You may be able to inherit part of this additional pension.
Anyone reaching state pension age after April 5th 2016, can inherit half of what’s called the ‘protected pension amount’ from their husband, wife or civil partner. This is the difference between the pension your husband, wife or civil partner had built up before the new state pension system came in on April 6th 2016, and what they’d have been entitled to under the new system. The only exception is women who paid the Married Women’s Stamp at any point during the last 35 years. They’ll be able to inherit under the old rules.
SAVVY TIP: If you live together but aren’t married, you have no rights to inherit any of your partner’s state pension.
If you’re a member of a workplace pension scheme and you are married or in a civil partnership, on your spouse or civil partner’s death you will be paid a percentage of the pension they built up. It’s called a survivor’s pension. If you’re living with your partner but not married, you should receive some of your late partner’s pension, but the rules are slightly different.
- If you’re married or in a civil partnership: Both public and private sector pension schemes will pay a survivor’s pension.
- If you’re living together: Private sector pension schemes will pay a survivor’s pension to the surviving partner where couples have been living together, but not married. It’s often described as being at the trustees’ discretion (the trustees are the people who run the pension scheme). In the case of public sector pension schemes, generally, people have had to fill in a nomination of beneficiary form in order to get a survivor’s pension if they’ve not been married or in a civil partnership. However, after a court case in Northern Ireland in 2017, the Treasury wrote to public sector pensions saying they couldn’t refuse to pay a survivor’s pension to the surviving partner of a couple who’d been living together, just because the person who’d died hadn’t filled in the nomination of beneficiary form.
SAVVY TIP: Pension rules for private sector pensions say that for a survivor’s pension to be paid to a partner where the couple lived together, the survivor would have to be financially (inter)dependent on their partner. That doesn’t mean that you would have to rely on them financially, more that your finances could not be entirely separate. Different pension schemes may have different rules about how they judge financial interdependence, but the main point is that it does not mean that you would have had to rely on your partner to pay for everything in order for you to get a pension.
Wills and inheritance
Most people don’t get round to sorting out a will, so it’s worth knowing what your rights are (or aren’t) if there’s no will in place. If you’re married or in a civil partnership, the surviving partner has the right to inherit a certain amount if there’s no will. If you live together but aren’t married, there’s no automatic right to inherit if there’s no will.
- If you’re in England or Wales, are married or in a civil partnership with no children: the surviving spouse or civil partner will inherit everything you own if you die and there’s no will.
- If you’re in England or Wales, are married or in a civil partnership and have children: the surviving spouse or civil partner can inherit up to £250,000 of money and assets, plus personal possessions and half the remainder if there’ no will. In Scotland the amount you inherit if there’s no will is different (up to £473,000 plus up to £29,000 in furniture and up to £50,000 or £89,000 cash, depending on whether or not you have children.)
SAVVY TIP: If you live with your partner but you’re not married, you would have to go to court to make a claim against their estate if they died with no will. The law is different in England and Wales, compared to Scotland. In Scotland there’s more of a framework for making these claims and you have six months in which to do it.
Divorce and your pension
If you get divorced or your civil partnership breaks down, the value of any workplace or private pensions could be taken into account when deciding who gets what. If you’re getting divorced in Scotland, only the value of the pension that’s been built up since the start of the marriage, would be taken into account.
Divorce and your home
If you’re married or in a civil partnership and your relationship breaks down, you have better rights relating to the home you live in, than if you’re living together. How you’re protected depends on who owns your home. In broad terms, if your ex husband, wife or civil partner owns your home, you can register your interest in it which means that you’d be told if your ex tried to sell it without your knowledge.
When it comes to what happens to the home when you get divorced or dissolve your civil partnership, its value would be be taken into account when sorting out the financial settlement, even if it was owned by one partner.
SAVVY TIP: In Scotland, its value would be taken into account if it was bought or acquired after you got married. It would also be taken into account if your ex bought it before you got married, if it was bought as the family home.
Relationship breakdown and your home
If you live with your partner but aren’t married, how your property is divided when you split up depends on who owns it.
- In England and Wales, if your partner owns your home, you may be able to make a claim for a share of it. How successful that would be would depend on whether you could show you had what’s called a ‘beneficial interest’. This could be because you’d paid towards the mortgage, or because you and your ex partner had an understanding or agreement that you’d get a share of it if you split up.
- In Scotland, you may be able to make a claim against your ex partner if you could show you’d suffered ‘economic disadvantage’ (or that they’d enjoyed ‘economic advantage’). This could be if, for example, your ex persuaded you to sell your flat or house and move in with them, which would mean you’d lost out on the chance to buy your own hom. Or it could be that you’d helped them buy their house or flat.
- In Northern Ireland, you may be able to make a claim for mortgage payments you’d made. However, you’d need evidence of these payments and there would have to be enough equity in the property for the money to be paid out.
Divorce or relationship breakdown
If you get divorced or your civil partnership breaks down, then money and property you own (whether you own it jointly or individually) can be taken into account when working out who gets what.
SAVVY TIP: In Scotland, only money or property that you’ve acquired after you get married is taken into account.
If you live together and split up, it’s down to you to decide who gets what. That’s probably fine if it’s an amicable split, but if it isn’t, or if one partner is controlling about money or has more money than the other, it could mean the other partner loses out.
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