3 effective tips to help you avoid the “singles tax” and plan for the future

When asked about her single status in a 2014 interview, pop icon Taylor Swift commented: “Life can be romantic without a romance.”

It appears many people share this opinion as the Office for National Statistics (ONS) reports there were 8.4 million people living alone in the UK in 2023.

Whether this is through circumstance or choice, many people are perfectly happy with single life and the independence it brings. However, you may find financial planning more challenging if you live alone.

Single people living alone spend an average of £7,564 more than each member of a co-habiting couple

While you might enjoy having your own space and the freedom to do what you like without navigating a relationship, being single can be expensive.

In fact, the Independent reports that single people spend, on average, £7,564 more a year than individual members of couples who live together.

This is because you often bear the full cost of expenses that couples typically split, including your mortgage or rent, and utility bills. You may also pay a “single supplement” for some services, including hotel rooms.

Additionally, you don’t receive certain tax benefits. For example, you miss out on the Marriage Allowance, which allows you to transfer unused Personal Allowance to your spouse or civil partner, potentially reducing the Income Tax you pay.

This means you effectively pay a “singles tax”, with larger outgoings potentially making it more difficult to meet your short-term financial obligations and plan for the future.

Fortunately, there are ways around this. Read on to learn three effective tips to help you overcome the singles tax.

1. Claim any discounts you’re entitled to

There are many costs you must cover yourself if you’re single, but you may be entitled to discounts on certain bills.

For instance, if you live alone or with people who are “disregarded”, you may benefit from a 25% discount on your Council Tax bill.

Disregarded individuals include:

• Children under the age of 18
• A person you care for who is not your partner
• Individuals with a severe mental impairment
• Members of religious communities including monks or nuns
• People in prison (excluding those in prison for non-payment of Council Tax).

Although you’ll still pay a disproportionate amount of Council Tax as a single person, claiming this discount could help you reduce your monthly expenses.

Many other government benefits are means-tested based on household income rather than individual income. This could mean that, as a single person, you’re entitled to more support than you realise so it may be worth checking to see what you can claim.

2. Invest in the right protection

Protection is important for everybody, but it may be especially crucial if you’re single as you could be less resilient against financial shocks.

According to MoneyWeek, while 73% of couples surveyed had enough emergency savings to cover three months’ worth of essential spending, fewer than half of single people had the same financial contingency.

As such, if an injury or illness means you can’t work for an extended period of time, you could find it more difficult to cover your living expenses.

It may also be harder to contribute to savings and investments for the future. Unfortunately, this could significantly affect your lifestyle in retirement and your ability to reach other long-term financial goals.

Fortunately, income protection could prevent this situation by providing a regular monthly payment – normally a percentage of your salary – until you can return to work. This could help you to pay your bills and avoid relying on expensive borrowing to cover your expenses.

It could also mean you’re able to contribute to pensions and other savings, helping you to stay on track to reach your retirement savings goals.

Another useful protection to consider is critical illness cover, which could pay a tax-free lump sum if you’re diagnosed with a qualifying illness. These funds can then be used to pay off your mortgage, cover living costs, pay for private treatment, or save for the future.

3. Prioritise your pensions and tax-efficient savings

Saving for retirement is typically much harder for single people for several reasons. Firstly, your general expenses may be higher so you’ll need to save a bigger pot than those in couples. It may also be more difficult to save in the first place if you have less disposable income each month.

Further to this, each person in a couple may benefit from State Pension payments. As a result, they might not be as reliant on their own savings to generate the necessary income to fund their desired lifestyles.

In fact, in February 2024, This is Money reported that single people needed, on average, £187,000 more in their pension pots to live a comfortable lifestyle.

That’s why it’s important to take advantage of pensions and other tax-efficient savings as much as possible so you can build additional wealth.

When you pay into your pension, you benefit from tax relief on contributions up to your Annual Allowance. This is £60,000 in the 2024/25 tax year.

You’ll automatically receive 20% tax relief on your contributions, and you may be able to claim an extra 20% or 25% if you’re a higher- or additional-rate taxpayer.

You may also benefit from employer contributions, and the wealth in your pensions is invested so could grow over time.

It could be useful to maximise these benefits by using as much of your Annual Allowance as possible each year.

You can also pay £20,000 to your ISAs in 2024/25. You don’t pay Income Tax, Dividend Tax, or Capital Gains Tax (CGT) on interest or investment returns from wealth in an ISA. Additionally, you won’t pay tax when withdrawing the funds.

Utilising these tax-efficient savings options and increasing your contributions where possible could ensure you have enough saved for a comfortable retirement.

We can help you navigate the singles tax by supporting you with budgeting, exploring protection options, and finding the most tax-efficient ways for you to build wealth for the future.

Get in touch

If you’re worried about how the singles tax might affect you, we can help.

Email enquiries@blackswanfp.co.uk or contact your adviser on 020 3828 8100.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate tax planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Workplace pensions are regulated by The Pension Regulator.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.