How being single affects your finances

How being single affects your finances

National Singles’ Day is celebrated on 11th November every year. There’s a reason it’s this date. It started off as a Chinese celebration, and the four 1’s in the date 11/11 demarked it as the obvious date for celebrating individuality.

It dates back to the early 1990s, and is now an enormous cause for celebration, it’s even been hailed the single biggest online shopping day in the world. It started off life more focused on bachelors only, but now it’s embraced by both sexes, but is being single good for your finances? Let’s take a closer look.

Taxes, Taxes, Taxes

Not so long ago it was in your favour in the UK to be married in terms of tax breaks. In short, there were financial incentives to getting married. As far as the tax man was concerned, you were viewed as one entity. That equated to tax benefits in real terms. This is relatively recent history, with changes happening first in the 1990s, before the Married Couple’s Allowance was removed altogether in April 2000, except for those already over the age of 65. Nowadays, as far as the tax man is concerned, you’re pretty much considered as individuals.

However, this isn’t 100% the case, as there is now a Marriage Allowance. This system allows a lower earning spouse (or civil partner) to transfer part of their tax allowance to their partner as long as they earn less than £45,000. This could equate to £230 in your pocket each year. Not really enough to get hitched for!

Tax in Other Ways

Then there are a few other ways in which those in a marriage or civil partnership get some tax breaks. In fact, probably the biggest tax benefit to being married comes is that any gifting between the couple during their lifetimes is tax-free. What’s yours is mine, in other words. This extends to possessions, assets and property when one of the couple dies. Effectively it means that the surviving partner counts for double the amount of the tax-free allowance when it comes to tallying up inheritance tax. The same applies to Capital Gains Tax.

Look to Your Savings

This principle also applies when you look at how your savings can make you money. If one half of a married couple or civil partnership earns less, then savings can be shifted across to the lower rate taxpayer and you’re in the money.

However, before you start thinking it’s financial doom and gloom unless you’re in a legally committed couple, this is where we start to see the drawbacks, and how instead being single can affect your finances for the better. Transferring all the savings across to one half of the couple requires an enormous, intangible thing: trust.

Trust – Good or Bad for Finances?

Entrusting your savings to your partner requires trust, in spades. It might make financial sense but you could say it requires more of a commitment than the marriage ceremony itself. If you’re single, you don’t need to enter into such commitments that rely on another human being.

There are multiple other benefits to being single when it comes to finances too.

Your Career, Your Way

Marriages and civil partnerships, even long term committed relationships without the legal documents, all require compromise. Fairly soon one of the biggest areas of compromise that becomes apparent is the career of each of the parties. It is inordinately difficult for both individuals in a relationship to pursue their own career without any sacrifices for the sake of the other. When you are single you can pursue your career unrelentingly without needing to compromise at all.

Your Money, Your Way

So, your capacity to earn your own money is completely in your own hands, as are your decisions about what to do with that money. Whereas in a relationship you will need to compromise on differing financial goals; when you are single, you can set the agenda. This means you don’t need to worry about the financial priorities of others, you simply choose what is best for you and your life. You won’t be required to help your partner out of debt for example, and if you have a dream to travel, you’re working directly towards it. You take the responsibility and you reap the rewards.

However, this is where singles can come face difficulties again. Whilst shouldering your own financial responsibility does come with rewards, it can also come with drawbacks. The buck stops with you, end of story. You’re also not sharing the load in any way, for example shared mortgages or living expenses.

So what do you think? Do the pros outweigh the cons when it comes to your finances and being single? Or is it the other way around?

Please note: All information within Your Resource Centre is correct at the time of publication, and we make every effort to keep content accurate. However sometimes information may be out of date. You should not rely on this information when making financial decisions as no financial advice has been given. The information reflects the view of the author and not that of Shepherds Friendly Society.

If you’re not sure what to do when making financial decisions then you should consult a financial adviser, who will likely charge for any advice that is given.

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