Millions of people could be missing out
The warning follows Government proposals to bolster the rights of cohabiting couples(Image: Visions via Getty Images)
More than 3.5 million unmarried couples living together are being cautioned that they could be missing out on valuable tax benefits and legal protections worth hundreds of pounds annually.
The warning follows Government proposals to bolster the rights of cohabiting couples, prompting financial specialists to encourage unmarried partners to reassess their finances. According to NFU Mutual, one of the most significant financial disadvantages is that cohabiting couples are unable to claim the Marriage Allowance, an HMRC tax benefit worth up to £252 per year.
The allowance permits a non-taxpayer to transfer a portion of their unused personal allowance to a basic-rate taxpayer spouse or civil partner. Claims can also be backdated, potentially increasing the total amount received. However, Sean McCann, Chartered Financial Planner at NFU Mutual, noted that unmarried couples are excluded from this benefit despite a growing number of people opting to live together without marrying.
He stated: “The marriage allowance allows non-taxpayers to transfer up to £1,260 of their unused personal allowance to their basic rate tax-paying spouse or civil partner. It’s worth up to £252 this tax year and claims can be backdated but is not available to cohabiting couples.”
The caution stretches well beyond income tax. Mr McCann warned that many cohabiting couples mistakenly believe they hold the same legal rights as married couples, only for complications to arise upon the death of a partner.
Under intestacy rules, an unmarried partner has no automatic entitlement to inherit should their partner dies without a will, regardless of how long they have been together or whether they have children.
“The surviving partner would need to make a claim on their late partner’s estate, which can be a time-consuming and expensive process, with no guarantee of success,” he said.
Inheritance tax can also prove costly. While married couples and civil partners can typically transfer assets to one another free of inheritance tax, unmarried couples are not entitled to the same exemption. This means a tax liability could arise when assets are left to a surviving partner.
Further complications can emerge over jointly owned property. NFU Mutual advised couples to check whether they own their home as joint tenants or tenants in common, as this can dictate what happens to a share of the property upon death.
Pensions are another area where cohabiting couples can miss out. Mr McCann cautioned that survivor benefits differ between pension schemes and issues can arise if a partner has not been formally nominated to receive death benefits.
Life insurance policies should also be reviewed, particularly where they have been placed in trust, to confirm that a cohabiting partner would actually receive any payout.
The warning comes as ministers weigh up reforms aimed at strengthening the legal standing of cohabiting couples, a group that has grown considerably in recent decades and now totals more than 3.5 million households across the UK.
For now, experts advise unmarried couples not to assume they enjoy the same protections as married couples and should ensure wills, pension nominations and insurance arrangements are up to date.
