27 Living Together and Your Rights if You Separate
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2. Why is living together different from being married?
4. Making a ´living together agreement´
5. When you are living together
6. If you or your partner dies
7. State benefits for people living together
8. Tax matters
There are no tax concessions for unmarried couples. Inheritance tax is the main area that can cause difficulty and hardship.
Income tax
There is now almost no difference between married and unmarried couples where income tax is concerned. The married couples' allowance ended in 2000, except where one or both people are over 65.
Inheritance tax
If your 'estate' (everything you own) is worth more than a certain amount when you die (called the 'threshold') then the estate is liable to inheritance tax at 40 per cent of everything over the threshold level. The threshold is currently £285,000, though the figure is reviewed every year. Married people and registered civil partners who inherit their spouse's or partner's estate do not have to pay any tax. But if you are not married or have not registered a civil partnership, you will have to pay.
If your estate is worth more than the threshold or may be getting near to it, you should take legal advice about ways of arranging your finances to reduce the tax your estate may have to pay. It also becomes more important than ever to make a will. Remember that the value of any home you own forms part of your estate.
Capital gains tax
Capital gains tax is charged on the profit made when things are sold or transferred. It applies when money or things are passed from one partner to another in an unmarried or unregistered couple, but not when they pass between married couples or registered civil partners. If you and your partner plan to transfer valuable assets between each other, seek advice from a specialist solicitor or an accountant. You do not have to pay capital gains tax if you sell your home. A couple who are married or are registered civil partners can have only one 'principal private residence' between them, but an unmarried or unregistered couple can have one home each, and do not have to pay capital gains tax on either of them
11. Arrangements if you have children
13. Sorting out other items you own
15. Terms used in matters to do with living together
This leaflet is published by the Legal Service Commission (LSC). It was written in association with Imogen Clout, a solicitor specialising in family law.
Latest version: August 2006
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