Single people could pay seven times more tax than a married couple and hundreds more for their car insurance, research by the Sunday Independent has found. Singletons also often lose out financially with holidays, inheritance and mortgages. So, as Valentine's Day approaches, how exactly are single people on the back foot financially - and bar getting married, is there anything they can do to overcome their money woes?
Single v married tax
A well-paid single person could pay as much as €12,000 more tax than a married couple on the same income, while a single person earning below the average wage may pay seven times more tax than a married couple, analysis by EY has found.
EY examined the total amount of tax paid by single individuals and married couples in employment and on equivalent pay packets.
A single person earning €35,300 would pay €6,068 in taxes (including income tax, the Universal Social Charge and PRSI) and take home €29,232 after tax. However, a married couple where both spouses work and earn €35,300 between them would pay only €806 in taxes and take home €34,494 after tax, according to EY. So in this case, the single person pays seven times more tax than the married couple.
A married couple earning €25,000 between them would pay no taxes if both spouses worked. However, a single person on the same income would pay €3,133 in tax and take home €21,867.
A single individual earning €60,000 will pay almost twice as much tax as a married couple on the same income - where both spouses work.
In this case, EY found that the single individual would pay €18,048 in taxes, while the married couple would pay €9,115. The tax advantage isn't as big for a married couple who have one child and only one spouse working. However, such a couple would still pay about €5,000 less tax on earnings of €60,000 than a single person would.
Meanwhile, a single person earning €100,000 will pay about €12,000 more tax than a married couple on the same income - if both spouses work, according to EY. The married couple would pay €26,395 in tax in this case, while the single person would pay €38,496. So, the married couple would take home €73,605 after tax, but the single person would only take home €61,504.
"Not only does the Irish tax system favour married couples over single individuals or cohabiting couples, there is also a further tax break where one spouse stays at home to care for a dependant child," said Michael Rooney, tax partner with EY. "This tax break is known as the home carer's tax credit. It is worth €1,600 in tax savings a year and only a married couple can claim it. The tax system has not kept pace with the increase in Irish couples who choose to cohabit rather than get married - and such couples are unfairly treated by the tax system."
One of the main reasons it is better to be married than single for tax is that married couples typically pay a lower proportion of tax at the higher 40pc income tax rate than single individuals. A single person also loses more of their income to the Universal Social Charge than a married couple with two breadwinners.
There's very little that single people can do to get around this tax disadvantage. Making sure to claim all the tax reliefs and allowances they are eligible for can help, though married couples will also be entitled to many of those tax breaks.
A single person could pay almost €200 more to insure a car than a married person - even if the only difference is their marital status.
Let us say that you are a 30-year-old male driver seeking to insure a second-hand Mitsubishi Outlander plug-in hybrid electric car.
The registration year of the car is 2015 and you have a five-year no-claims bonus, a full driving licence, no penalty points and no claims. You are an accountant living in Clontarf in Dublin.
The online insurance broker coverinaclick.ie checked the cost of car insurance for a single driver of such a car, compared with a married driver. One insurer quoted €1,015 if the driver was buying cover for himself alone - but €824 if the driver was married and seeking cover for himself and his spouse, according to the website.
So, the quote for the single driver was €191 higher than for the married person.
If the same driver owned a 12-year-old petrol Nissan Qashqai, he could pay about €150 more to insure that car as a single person than as a married individual. One insurer quoted €866 if the driver was buying car insurance for himself alone - but €715 if the driver was buying cover for himself and his spouse.
Singletons can pay more for car insurance than married people because they are often deemed to be a higher insurance risk than their married counterparts. Furthermore, unlike married or cohabiting couples, single people living alone often don't have the option of adding a named driver to their policy. Doing so, however, usually brings down the cost of insurance.
Many insurers offer multi-car discounts to a driver, if their spouse or partner has their car insured with the same firm, as long as the car is at the same address. Single people will usually only qualify for a multi-car discount if they own more than one car at the same address.
To help bring down the cost of car insurance, singletons still living in the family home could add a named driver with plenty of driving experience and a good record to their policy - such as a parent.
Singletons should also be careful about the car they choose to buy. Usually, the more powerful the car, the more expensive the insurance.
Single hotel rooms are often hard to come by. There are some Irish hotels which offer single rooms at either half the price of, or much cheaper than, a double room - such as Rathmullan House in Donegal and Delphi Lodge in Galway. However, there are many hotels where single rooms are not available. Most hotel rooms are built on the assumption that two people will stay in them - and so single people are often charged a single supplement so that a hotel doesn't lose out when only one person stays in a room.
"When you see a hotel saying that it has no single supplement, it's usually only when they have trouble selling a room - or it could be a very small single room that's being offered," said Eoghan Corry, editor of Travel Extra magazine.
Singletons are often at a disadvantage with sun holidays too, as such trips are usually priced for, and work out better value for, couples and families. There are some travel agents who offer holidays for singletons, but these can be expensive and often involve travelling with a group. "Very often on the specialised holidays for single people, you're sharing a room with a stranger," said Corry.
One big advantage which single people have over families, however, is that they don't have to pay for children's flights and accommodation.
Taking vacations outside peak holiday times is one way in which single people could try to offset the extra costs they face. Unlike families, single people usually have more flexibility on the dates they can travel, and therefore can travel at quieter and less expensive times.
Booking early is also wise as it gives you a better chance of securing a cheaper single room. Some hotels offer discounts for advance payment so this could help, though payment upfront is usually non-refundable.
Single people face an uphill battle when getting a mortgage - unless they're on a high salary and have substantial savings behind them. Couples often have it easier when applying for a mortgage as they can combine their incomes and savings.
It is often easier for couples to qualify for an exemption to the Central Bank rules, where you can borrow more than these rules typically allow.
A single person needs at least €60,000 to qualify for a Central Bank exemption, while a couple needs at least €80,000, according to Michael Dowling, managing director of the mortgage broker Dowling Financial. So, to be in with a chance of getting such an exemption, a single person needs to earn at least €20,000 more than each partner in a couple would.
To boost their chances of getting a mortgage, single people need to save well from early on - and are likely to have to get a handout from parents. Otherwise, they could face a life of renting.
Higher tax on property windfalls
The tax bill arising from the sale of a property is likely to be higher if it is owned by a single person rather than a couple. Capital gains tax (CGT) is a tax paid on profits made from the sale of a property. CGT does not usually have to be paid if the property being sold is the principal private residence of the seller. However, CGT usually must be paid on profits earned from the sale of an investment property. “If you are the sole owner of an investment property and you sell that property and make a profit in doing so, there’s only one annual exemption from CGT which can be claimed — but if the property is owned jointly, the gain would be halved between the couple [for tax purposes] and they’d both get the annual CGT exemption,” said Oonagh Casey-Grehan, tax partner with Fagan & Partners.
Under the annual CGT exemption, the first €1,270 of an individual’s taxable gains in a tax year are exempt from CGT. This exemption would be worth €2,540 to a couple who own a property jointly.
“It’s very easy for a married couple to give gifts and inheritances to each other,” said Casey-Grehan.
“The main advantage of being married when it comes to property and inheritance is that any transfers between spouses are exempt from CGT, inheritance and gift tax, and stamp duty. However, single people — or people who are living together but not married — can get caught by these taxes.”
Partners in cohabiting couples are effectively strangers for the purposes of inheritance tax, as they are not blood relatives and they are not married. So, the inheritance tax bill faced by the surviving partner in a cohabiting relationship can often be crippling.
By comparison, a spouse or civil partner does not have to pay inheritance tax on anything left by the deceased partner to him or her (though a divorced or separated spouse may have to). To avoid landing friends or others with a large inheritance tax bill, singletons could drip-feed their inheritance, whereby they give small gifts — worth up to €3,000 a year — to donees. Under the CAT exemption, an individual can inherit up to €3,000 a year from any person tax-free, regardless of whether or not they are related or married.
Tax can be crippling for those inheriting a pension from a single individual, particularly for an Approved Retirement Fund (ARF — a personal retirement fund where you keep your money invested after retirement).
“If the ARF is being left to anyone other than a spouse, civil partner or children, then the ARF provider will deduct income tax on the amount paid out and the recipient will be subject to inheritance tax on this amount — so the overall tax paid could potentially be high,” said Peter Griffin, director of APT Workplace Pensions.