MONEY COMMENT
Why It's Cheaper To Live Together

By Cliff D'Arcy
December 16, 2003

One thing's for sure: living isn't getting any cheaper. Sure, there are bargains galore in the January sales, but our household bills keep on getting bigger and the costs of running our homes, cars and families rise relentlessly. But, despite these expenses, more and more people are choosing (or ending up) living alone.

Thanks to us marrying later and divorcing more often, there are more single-adult households than ever before - around one-third of all households include just one adult.

Despite this trend towards living "home alone", there are huge financial advantages to living together, especially if you decide to get hitched. Here are some of the savings you can make by shacking up:

Renting or buying a home: The rent for a one-bedroom flat is the same whether there's one head on the pillows or two. By sharing the rent, you're halving one of your biggest costs.

Very few young singles can afford to buy their own home, unless they have family wealth or a high income. Most mortgage lenders will lend you up to four times your salary (about £98,000, based on the average income of about £24,500). This isn't enough for a home in many parts of the UK, especially the southeast.

Two people buying together can borrow around 2.5 times their joint income. For two average earners, this bumps up your buying power to £122,500 (equal to an extra salary). Also, it's a lot easier to save a deposit from two wages, all of which helps get you on the property ladder.

A single person pays 75% of the council tax (thanks to a 25% discount); two people pay 50% each. Household insurance can actually be lower for two people than for one (if one of you is at home during the day). The TV Licence applies per household, not per person, so this year's £112 becomes £56 each.

Sharing meals obviously means lower shopping bills. Also, there's only a small increase in the cost of cooking, washing and fuel when someone moves in, so the individual cost is much lower. If you enjoy sharing a shower or bath, you're being environmentally friendly and halving your bills!

Running a car: If you can cope with sharing a car, you'll save a lot of money on annual servicing and regular maintenance. You'll pay only one lot of car tax (up to £160 a year), plus car insurance premiums don't double if you add an extra driver to your policy - even if they're as terrible as me! Alternatively, you can get discounts using public transport by buying family rail, coach or bus tickets.

Leisure: By sharing your United season ticket and buying joint membership at the gym, you can cut down on the costs of leisure and getting healthy. Alternatively, by jointly giving up smoking or drinking, you could make massive savings and feel great at the same time.

Finances: Many deposit accounts have "tiered" interest rates: the higher your balance, the higher the interest rate paid. By pooling your savings together, not only do you have a larger pot but you can earn more interest.

Alternatively, you can transfer savings and other income-generating investments between partners to allow the partner with the lower tax rate to take the lion's share of the income and reduce your overall tax bill.

There are still a few tax advantages to being married. For example, every adult is allowed to make capital gains of £7,700 without paying tax. So, if I sold shares for a £15,400 profit, I could end up paying tax of up to 40% on half, landing me with a bill of £3,080. But, by transferring half to my spouse and selling using her tax allowance, I could save myself a small fortune.

There also tax concessions for married couples when one partner dies, which could save you around £100,000 (40% of the tax-free band of £255,000) with careful planning. This is a complicated subject though, so it makes sense to seek advice if you have substantial amounts of assets.

Learn more at the Fool's Homeowning Centre | Buying A Car | Saving | Taxes

This article was originally published in January 2003.