The Civil Partnership Act (CPA), which comes into force on 5 December, could have huge implications for the finances of people who are living together even those not in a relationship, says Paul Farrow in The Daily Telegraph.
While the headlines have concentrated on the legitimising of gay marriage', the new law will also enable friends who are living together on a platonic basis to register as civil partners and reap the same financial rewards, says the Association of Chartered Certified Accountants (ACCA). Those who register as partners will be able to enjoy most of the same state pension rights as husbands and wives and the same entitlement to any private or occupational pension currently enjoyed by a widow or widower.
Civil partners will also be entitled to the same tax benefits as a married couple, which means that they can transfer assets to minimise tax (this is likely to be especially useful with regards to inheritance tax and capital gains tax allowances). John Davies, head of business law at the ACCA, cited the instance of two elderly people of the same sex living together as companions and sharing costs. It would make sense for them effectively to marry' each other so that the house can be passed on tax-free and the survivor can maximise their pension benefits.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
There are possible negative effects for same-sex couples as a result of the act as well, says Stephen Ellis, also in The Daily Telegraph. As of 5 December, partners of the same sex living together as a couple will be treated as a family unit', which may restrict any income-related benefits, whether or not they enter an official civil partnership. Unmarried men and women living together are already treated in this way.
Gay couples should also consider the full implications of a civil partnership before rushing off to tie the knot. Civil partnerships are likely to be just as difficult and expensive to dissolve as a marriage and, as a married couple', you are only allowed one family home, making any other property liable to capital gains tax on profits exceeding £8,500 this year.
Civil partners should make new wills and, if both run separate businesses, they should be aware of the corporation tax implications (the businesses will be deemed as being connected', which immediately halves the allowance for the lower rate for each firm). The other area to take particular care with is where one partner is domiciled in another country for tax purposes, says Nici Goldsmith, a specialist tax adviser with Blevins Franks.
If you do want to go ahead and the Government expects up to 22,000 people to take the plunge by 2010 all you need to do is give notice of your intention to form a partnership at a register office as of next week. Just don't forget to sell the house or one of them, at least before the civil partnership ceremony, so you can take advantage of two lots of tax relief.
-
ScottishPower launches half-price electricity at weekendsNews ScottishPower is offering 50% off electricity at weekends, which could slash hundreds off your bill. We look at who can get it and how to apply
-
Trump calls “tariff” the “most beautiful word in the dictionary”, but investors may disagreeDonald Trump has promised to slap Mexico, Canada and China with new tariffs on day one of his presidency. What does it mean for the economy and investors?
