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Home Publications Couple penalties and premiums in the UK tax and benefit system

Couple penalties and premiums in the UK tax and benefit system

Briefing note

This report analyses the distribution of couple penalties and premiums in the tax and benefit system using a large, statistically representative sample of households. It defines 'couple penalties and premiums' in the tax and benefit system as the change in entitlements to benefits and tax credits and in liability to taxes that occurs when two single people marry, or start to live together as husband and wife. Two adults can almost certainly save on living costs by living together, but unlike some past studies, this study does not attempt to measure the overall financial or non-financial benefits or costs to living as a couple compared with living apart. This study cannot tell us whether couples would be better off living apart than living as a couple, but simply measures how taxes and benefits vary by family situation, an issue of more direct public policy concern. In general, our analysis is not always consistent with past studies of couple penalties and premiums, some of which have tried to measure not just couple penalties and premiums from the tax and benefit system, but also the inherent financial advantage that arises when living as a couple (by comparing equivalised net incomes after housing costs).

The report uses the phrase 'net state support' to refer to entitlements to benefits and tax credits less liability to taxes. If net state support rises when a couple splits up, then this is called a 'couple penalty'; if net state support falls, this is called a 'couple premium'. In some cases, net state support does not change when a couple splits up, and we say that the tax and benefit system is neutral towards relationship status in these cases. The words 'penalty' and 'premium' are unfortunate, because they suggest that couple penalties are undesirable and couple premiums desirable. Although policymakers may make that judgement, they may also make alternative judgements.

Find out more

All the main UK political parties claim to have put the needs of families at the heart of their campaigns. The Conservative Party has also pledged to end the couple penalty for all couples in the tax credit system. How does the reality - as measured by specific pledges in their manifestos - match ...
The Prime Minister David Cameron has announced how the Government proposes to recognise some marriages and civil partnerships in the income tax system. From April 2015 it plans to make up to £1,000 of the income tax personal allowance transferable between adults who are married or in a civil ...
Press release
The majority of people in the UK would receive more financial support from the state if they were single (or told the authorities they were single) than if they were married or part of a cohabiting couple, according to new research.