When ‘it’s complicated’, gets financially complicated. A guide to the single’s tax.
First Sentinel Wealth
Independent Financial Advice and Wealth Management Services
Many among us are single. Some choose to prioritise their careers, while others like the flexibility that being untethered offers. If you’ve ever had a long-term relationship that ended, you may have found that your bills increased. And not just slightly but substantially. Or if you are single and you’ve been talking finances with your couple friends, you might have noticed a disparity. In fact, there is a colloquial name for this phenomenon, namely the ‘singles tax’. This refers to all of the costs that are incurred by those not in a relationship, simply because they don’t have that second (or third) person to help with their liabilities. This article will look at the singles tax, investigating what it is, how it functions and what its effects are for single people in the UK.
What is the single’s tax?
The single tax isn’t any sort of official thing. You won’t find HMRC badgering you or bailiffs knocking on your door if you’re not paying up. Rather it’s a colloquial name for the extra financial burden that being single as opposed to in a relationship puts on you. A personal finance expert, speaking on BBC Morning Live in July argued that the causes of the ‘single’s tax’ are twofold. Namely, they consist of the lack of a second income to help cushion costs, as well as the nature of our tax and retail systems which are primarily organised around couples and families. According to research by Hargreaves Lansdown, being single costs on average ￡860 more per month than being in a couple. This not only includes the question of bills, but also couples’ discounts when it comes to amenities such as travel, streaming services and gym memberships.
A crucial example of the latter factor here is when thinking about a person’s living situation, specifically in relation to rent and council tax. A single person will theoretically use the same amount of utilities as a person in a couple, yet will most likely require the same number of bedrooms as the combined couple. This can hit hard firstly in terms of rent as the single person will be paying twice that of the coupled person, but also in terms of council tax, since according to the UK Government website, this levy is calculated based on a benchmark of 2 adults living in a home. A person living alone can get a discount of 25%. Nevertheless, one would assume this should be 50%. A single person living alone is thus effectively paying council tax for one and a half people.
A different example is the question of food shopping. If you’ve ever lived alone, you will have realised that shopping for just yourself is a nightmare. You can’t ever buy things for just one portion; it always ends up being at least three or four portions. You can use this notion to meal prep, but sometimes you don’t want to be eating the same spagbol for four days in a row. Even if you do try and buy smaller portions, this can often be more expensive than buying larger portions.
To illustrate this, consider chicken economics. A 400g pack of chicken breast at Tesco is currently ￡3.35. A 1.5kg medium sized whole chicken is ￡4.10. That is over three times as much chicken that you can get for less than a pound more. For a couple, a whole chicken is a nice Sunday roast, with some leftovers on the side for work on Monday. For a single person, a whole chicken would simply not be an option, unless they plan to eat roast chicken every day for a week. Thus, they have to abide, buying the more expensive smaller portion.
Naturally, the food issue is more solvable and manageable than the housing one. Single people can try to actively meal prep, or buy in bulk and then freeze the excess. Nevertheless, this requires significantly more planning, with some level of food waste being inevitable, simply because food in supermarkets is marketed towards a couple or a family.
Fundamentally, single people face more bills overall, simply because our world is more financially geared towards couples. Couples can get discounts on railcards, hotels, flights, etc. They can even share memberships and subscription, meaning they can both use the same Netflix account, while the single individual has to fork up the ￡7.99 themselves to be able to binge watch ‘Bridgerton’ or ‘The Crown’.
What about single parents?
Single parents often have it especially tough. They are normally the single earner in a household, and as such, face the obstacles that other single people face in our couple-centric world. Nevertheless, there are also the added childcare costs, as well as usually the reduced work hours in order to take care of children. This means that a single parent’s budget will be especially strained. In terms of financial resilience (how an unexpected cost would impact your finances), Hargreaves Lansdown explains that single parents often fare particularly badly, with 71% of this demographic having poor to very poor financial resilience, this being twice the average rate. This means that they are often hindered in their ability to build up a sufficient emergency fund, and may be more likely to depend on bank loans when things go south, which can further constrain their financial abilities in the future.
There is support for single working parents, especially those on low income, who can look into working tax credit and child tax credit in order to support them in their living and childcare costs. Nevertheless, these aren’t all-encompassing and single parents still find themselves with a day-to-day financial burden.
The challenges facing single parents have been in the news a lot recently, especially regarding questions about the two-child benefit cap. In fact, 70% of those affected by this measure are single-parent households, which adds further strain to their finances. Pressure is also felt further up to income scale. Child benefits cease to apply to those earning over ￡100,000. What this means in practice, however, is that a single parent earning ￡100,000 annually will lose out on child benefits, while a couple each earning ￡99,999 and thus a combined income of ￡199,998 will retain them.
Why is this interesting?
A big reason why this is interesting is that the number of single people as a proportion of the UK is increasing. The number of people living alone has already increased by 8.3% over the last 10 years, with the Office for National Statistics predicting that by 2039, 1 in 7 people in the UK will be living by themselves, around 10.7 million people. In fact, the most noticeable trend here has been the rise in older people living alone. The number of those between the ages of 45 and 64 living alone rose by 53% from 1997 to 2017.
What this means is that more people are going to be affected by the singles tax. The ‘tax’ will inevitably lead to more people who feel less financially secure and more vulnerable. It will mean fewer people feel financially secure enough to buy property, exacerbated by the fact that most housebuilders prioritise family homes and leaseholds to maximise profitability.
This problem will continue to expand, and there will be some onus on Parliament and legislators to make sure that some steps are taken to minimise the burden on single people.
What can you do to reduce the ‘tax’?
Unfortunately, many of the rules and much of our couple-centric world isn’t likely to change, meaning single people will find themselves worse off. Nevertheless, there are measures you can take to reduce the impact of the singles tax.
1.Housing
If you are living alone, make sure you apply for the council tax discount! This isn’t automatically configured meaning you have to apply yourself to utilise it. If you’re living alone, you can get a 25% discount on your council tax.
Importantly, you can get still get the 25% discount if you are living with someone who is exempt from paying council tax. This is the case if your cohabitant is:
2.Food
First of all, use your freezer! As mentioned, a lot of food sold in supermarkets is cheaper when bought in larger amounts. Many things can be stored beyond their use-by dates, from bread to meat to soup. This means you can minimise your food waste, while reducing the cost of your food shop.
Also, consider buying cupboard items in bulk. Things like rice, pasta, oil etc. are cheaper when bought in larger quantities and don’t go bad, at least not very quickly. Buying big bags of these means you spend less in the long run.
3.Subscriptions, trains, membership
Wherever an opportunity to put two people on a membership arises, uses your friends. Share your Netflix accounts with your mates, use them to get a discount railcard etc, get a museum membership together.
Note that for the Two Together railcard, you have to start and end your journeys together to get the discount. If there is someone with whom you regularly commute, get together and use the discount.
4.Car insurance
When utilising your friends and family, you could also share car insurance. Some insurers actually charge higher premiums to single individuals since they deem them a higher risk for an accident. Engaging one of your friends or family into your car insurance could save money for both of you.
Disclaimer to this! You can’t just share the insurance. You have to both use the car. If you have only added the friend for the insurance and they don’t use the car, this may be considered ‘fronting’ which is illegal, and may make you criminally liable.
To conclude
As we have seen, being single is expensive. Costs are exacerbated with everything from your food shop to your holidays. As aforementioned, there are steps that can be taken to try and reduce your burden, whether this means getting council tax discounts, streamlining your food shop or using a mate to get rail discounts. Nevertheless, this won’t relinquish the whole burden. Much of the onus will be on Parliament, to legislate for single people, especially since this demographic is ever-increasing and becoming more overlooked and undervalued.