FOOL'S EYE VIEW
How To Save Money When You Live Together

By Alison Hunt (TMFAlly)
February 3, 2005

Following on from my recent article on how to save money if you're married, I wanted to do the same for all the people who are currently living with their partner.

In 1996, it was estimated by the Office of National Statistics that there were 1.6 million cohabiting couples in the UK. Today, there are believed to be around 2 million. If you're one of them, follow these steps and save more of your money!

1. Save Rent

This may have been a key factor in why you decided to move in together – after all, renting a home together will usually save you both money – only one landlord to pay, not two! You'll save money on bills and council tax too!

2. Buy A Home Together

With current house prices being so high, being able to afford your own place often means you'd have to be on a pretty large salary (especially in the South East). But pooling your resources (salaries and savings) and buying your own place can not only mean you can afford a bigger house/flat, it may also save you a fortune in rent and means your money is attacking your mortgage, not someone else's.

Bear in mind though that, since prices have soared in recent years, now may not the best time to plunge headlong into the housing market, especially if you don't have a large deposit to put down. Also make sure you've consider who will get what should, heaven forbid, you decide to split up at some point.

Take a look at our Mortgage Centre for more information.

3. Use Your Tax Bands Wisely

If you and your partner are in different tax bands (and you both trust each other!) make the most of it and keep more of your interest.

If one partner is a lower rate taxpayer, keep your savings in his/her name. On £3,000 in an account paying 5%, you will make £117 per year in interest, as opposed to £103.50 from a joint account. If he/she were a non-taxpayer, you would make £150.

Take a look at our Savings Centre for some top-paying Savings Accounts.

4. Make Sure You Both Use Your ISA Allowances

Everyone over the age of 16 can take out a mini-cash ISA each year, to deposit up to £3,000 for tax-free interest. And everyone over 18 can have a mini-share ISA, to invest a further £3,000 into equities.

Those with a bit more money can take out a maxi-share ISA (instead of mini ISAs) to invest up to £7,000 into equities.

You both have this allowance so make the most of it – and you still have time to use up your 2004/5 allowance if you open your account before April 5th.

Take a look at our ISA centre for more information.

5. Wills

Have you ever used the term 'common-law-wife/husband' when referring to your partner? Long-term cohabiters are often referred to in this way, even though legally, this term does not exist. This unfortunately means that couples who live together lose out on many rights that married couples automatically receive, such as inheriting their partner's estate if there is no will.

In order to make sure you and your partner are protected, make sure you both have up-to-date wills.

Everyone, (and that includes married people) should have an up-to-date will. By taking a simple trip to see a solicitor and writing your wills, you can take control of your assets and most importantly, save money by reducing the amount of inheritance tax (IHT) your partner will have to pay from your estate upon your death.

IHT is currently payable at a whopping 40% on anything in your estate over £263,000 (and when you bear in mind this includes your home, it may not seem such a ridiculously large sum).

You can learn more about avoiding IHT in this article, and find out why wills are so important in this article on Wills and Living Together.

6. Draw Up An Agreement

Whilst you're writing your wills, why not investigate creating a Living Together agreement?

7. Pensions & Life Insurance

Couples, who live together, unlike married couples, are not entitled to receive the state pension or bereavement allowance for deceased partners. Taking out a suitable life insurance policy can help provide for your partner in this case.

In addition to this, not all company or private pension schemes will pay out to partners. Check the details of your scheme, and consider moving if necessary.

Find out more in our pensions and insurance centres.

The Civil Partnerships Act however, passed in November 2004, has changed the way the law treats same sex couples, providing them with most of the rights enjoyed by married couples, such as bereavement and pension benefits. You need to 'register' your partnership for it to apply, and doesn't come into force until November, but it does greatly improve your rights.

So, if you're currently living with your partner, follow these first few steps, take advantage of your situation and save money!

Check out our current deals on mortgages, savings, ISAs, pensions and insurance.