Can you afford to stay single?
Unshackled by the bonds of marriage, you might feel free to do as you please. But beware: you pay a huge price in tax
Illustration: Dearbhla Kelly/Irish Times Premedia.
Staying single may be your life’s philosophy. Or perhaps it has been thrust on you and is something you struggle with. Or maybe it’s just a transient state before you couple up. Whatever the reason, it’s hard to avoid the fact that being single is going to cost you. And you may be surprised to learn just how much.
It’s an obvious assertion to make that, if you are single, life is going to be more expensive, even if you don’t have children. A UK survey recently put the extra costs of living alone at about €4,000 a year. After all, there’s just one person to pay the broadband bill, one person to pay the property tax, one person to bring home the milk and bread. And, although only one person is consuming these goods and services, standing charges built into so many services – about €100 a year for gas, for example – can put you at a disadvantage if you live alone.
And what about the stream-of-life events that married people enjoy? If you’re single, once you’ve worn your cap and gown at graduation, few occasions celebrate you. Your married school friend or colleague, on the other hand, are likely to have benefited to the tune of about €1,500 from your munificence: €100 for an engagement present and party; €300 for a hen or stag weekend; up to €1,000 for a wedding present, outfit and wedding itself; €30 for a baby shower; and €30 again for a present for the newborn.
Remember that episode of Sex and the City when the shoe-loving singleton Carrie Bradshaw, despairing of having repeatedly to fork out large sums of money to celebrate her married friends’ lives, delivered a note to a particularly smug married friend asking her to also contribute to the friendship?
“I’m getting married. To myself. I’m registered at Manolo Blahnik,” she wrote.
And being single will also cost you in less obvious ways you might not have considered. Think about car insurance. Insurance companies can no longer offer prices based on your sex, thanks to the EU gender directive, but they still can do so based on your marital status. According to Chill.ie, for example, the cost of insuring a single person to drive a Volkswagen Golf is about €545 a year. Add a spouse to that policy and it drops to €504. Add an unrelated female to the policy, however, and it jumps up to €581. So, yes, insurance companies deem you to be more of a risk if you’re single.
And what about mortgage protection when you buy a house? About 40 per cent of mortgages being approved by Bank of Ireland are going to single people, for example, and for each of these loans the bank will make you pay a couple of hundred euro every year for mortgage-protection insurance, to reduce its risk in the event that you die. But do you need such protection when you don’t have a family to inherit it?
It gets even trickier when it comes to the tax treatment of single people. Back in 2000, when the Celtic Tiger was starting to roar, Charlie McCreevy, as minister for finance, wanted more people in the workforce, to keep the economy driving ahead. So he introduced the concept of “individualisation”, which aimed to encourage stay-at-home spouses back into the workforce, by bumping up the tax credits to which two working spouses were entitled.
While much of the furore at the time centred on families with a stay-at-home parent, who felt they were being hard done by, the measure has also had a lasting impact on widening the tax burden between single people and those who are married or in civil partnerships.
Tax experts may assert that what we have now is a hybrid form of individualisation, but tax policy in Ireland – and to a large extent that in the western world – continues to promote the nuclear family. The Constitution enshrines the family as the cornerstone of Irish society, the “moral institution that possesses inalienable and imprescriptible rights”.
Sources: PWC, CSO, Eurostat, chill.ie, Travel Department
But what does this mean to the typical single person? The facts are striking, thanks to some figures that PricewaterhouseCoopers has put together.
Consider two people, male or female, one of whom is single, the other of whom is married or in a civil partnership. The single person is earning a comfortable €100,000 and paying an effective rate of tax – which is to say the proportion of their income that they pay once tax credits, allowances and so on are taken into account – of 41 per cent. This means that they get to bring home €59,000.
But a married couple who both have jobs, and between them earn €100,000, pay tax of just 30 per cent on their income, bringing their take-home pay to €70,000; that’s €11,000 more than their single friend.
Over a lifetime this disparity can add up. In a working life of 40 years, based on current rates, the single person earning €100,000 will pay about €1.65 million in tax, compared with about €1.2 million for the dual-income married couple – a whopping difference of almost €450,000. (When only one half of a married couple earns an income, the difference is not as great, with an effective tax rate of 38 per cent on income of €100,000, and total tax of €1.5 million over 40 years.)
The difference is even greater for people who are on a lower income. Take a person earning €50,000. On an effective rate of 30 per cent, that single person will pay about €600,000 in tax over 40 years. Married friends who both have jobs, on the other hand, and together earn €50,000 between them, will pay only €300,000 or so, thanks to an effective tax rate of just 15 per cent.
According to Annette Kelly, a senior tax manager at PwC, the main reason for such a large difference is that dual-income couples pay a higher proportion of tax at the lower 20 per cent rate; they also benefit from lower universal-social-charge thresholds: “It’s better to be married, with both spouses working, than to be single.”
And it’s not just income tax where single people are disadvantaged. Inheritance laws are also against you: if you’re married you can transfer assets to your spouse free of tax, but if you’re single with no children, anyone who inherits your estate is likely to pay some element of tax on it. Conversely, if you inherit assets from a non-family member, you may have to pay tax on it, depending on how large the inheritance is.
Ah, but married couples have children, you say, and therefore need any help they can get from the Government to cover the cost of childcare and so on. Well, yes. And no.
After all, not all married couples have children. And Dinks – double income no kids, to use one of those annoying acronyms – are on the rise.
The 2011 census found that there were 261,652 married couples with no children in Ireland, accounting for about 31 per cent of all married couples. This is up from 25 per cent in 1996.
And if there are fewer married couples with children, there are also more single people. In 1996 there were 1.1 million single people in Ireland; by 2011 this had jumped to 1.5 million. One in every five Irish women between 40 and 49 is now single, as is almost one in every four men in the same age group – and this doesn’t include the 400,000 or so people who are on their own after separation, divorce or being widowed. Maybe it’s time for a rethink.