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What advantage do married couples have over co-habitants?

Tax benefits and shared pensions are hardly the most sexy or romantic of subjects and yet these contribute to the reasons marriage may be a positive idea for couples who are cohabiting anyway. There are several financial benefits associated with tying the knot, and we look at some of them below.

Understandably, marriage is not for everyone, and some people weigh up the initial expenditure of a costly wedding and the potential of a messy divorce and decide they are best to remain cohabiting. However, for couples who manage to work things out and stay together, the monetary benefits of the union of marriage are indubitably substantial.

Pensions and death taxes

Especially if you have a property that ranks as high value, cohabiting could incur huge tax penalties in the event of one partner dying. This can be overcome with opting for marriage, which entitles spouses to tax and financial benefits and inheritance tax is avoided by marriage. Planning for pensions is something all couples should do, and spouses still receive better benefits from these.

State bereavement benefit

The government pays a bereavement benefit to all recently widowed people within a specific age category. This occurs when a husband, wife or civil partner dies and you are between the ages of 45 and pension age of 65. You receive this benefit for a year after the death of a spouse and can be really useful in times of hardship following the death of a loved one.

Capital Gains Tax

There are ways that being married allows couples to manipulate their capital gains taxes, to their advantage, maximising benefit. It is 18 per cent for people in the lower tax bracket and 28 per cent for those in the higher, and is paid on assets such as buy to let properties. In a marriage, a couple can reduce their tax bill by transferring ownership of an asset to the spouse in the lower bracket, saving 10 per cent.

Following this, if an asset has been held by the lower paying spouse for the purpose of gaining income tax relief, when a married couple decide to sell, they can transfer half of the asset back over to the higher paying spouse in order to advantage of the exemption awarded to both partners, thus saving around £10,000. This same strategy would not work for cohabiters, who would be charged to make the transfer. 

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