The UK government has published a consultation to allow opposite-sex couples to enter into a civil partnership, which would likely have a knock-on effect on the country’s tax system.
Currently, only same-sex couples are allowed to do so, but the government said this right could be extended to heterosexual couples by the end of 2019.
If civil partnerships are going to be available to anyone, this would also mean that unmarried couples could benefit from the same tax rights as married couples.
“The days when the overwhelming majority of families were a husband and wife and their children is a thing of the past,” said Rachael Griffin, tax and financial planning expert at Quilter.
“Figures from the Office for National Statistics show that marriage rates remain at historical lows – in 1941 there were 471,000 marriages in the year compared to 243,000 in 2016 – a drop of nearly 50%.
“However, while society has shifted dramatically, tax rules and benefits have not gone with it, indicating that unmarried couples and their children don’t deserve the same kind of support as those that are married.”
Doing things right
The government’s consultation follows a landmark judgement by the Supreme Court, which ruled civil partnership should be extended to opposite-sex couples.
“The consultation […] confirms the government are planning to extend the rights of civil partnerships to opposite-sex couples and this offers three million cohabiting couples the ability to gain the taxes and financial rights that were previously solely for those who opted for marriage,” Griffin added.
She said civil partnerships would mean:
- Bereavement payments – For those whose partners die today the combination of the bereavement support payment and widowed parent’s allowance is worth up to £11,608.20 ($14,510.83, €12,900.67) for the first 18 months. This is a substantial sum of money for people who are struggling to cope with a life changing event and trying to get back on their feet. It is only right that is available to all;
- Occupational pension schemes for widows/widowers;
- Income tax – the marriage allowance allows for the transfer of up to £1,190 of your personal allowance to your partner if they earn more than you;
- Inheritance tax (IHT) – estates are passed on tax-free to the surviving partner in a couple; and,
- State pension – enhanced income for the surviving partner under the old state pension system.
“In general, policymakers need to ensure their taxes and policies are fit for the modern day as even relatively new taxes are steeped in history.
“The system clearly needs a rethink and a different way of determining when the taxes and benefits apply,” Griffin added.
