Taxation issues for cohabiting partners

D

Dee2006

Guest
Hi
My partner and I are in the process of purchasing a house. We are not married at the moment but plan to be in a few years. My query is in relation to the mortgage protection policy we will have to take out to cover our mortgage. As we are not married I have been told that it would be wiser to take out 2 seperate mortgage protection policies with me as the policyholder on one and my boyfriend the life assured and vice versa on the other rather than one joint mortgage protection policy. With the 2 seperate policies there would be no tax liability if either one of us dies. But with the one policy there would be tax payable if one of us dies?
Can anybody confirm this for me or provide further information??
 
Seems strange to me - With a mortgage protection policy, the beneficiary of the policy is the financial institution who gave you the mortgage. The cheque goes to them and they clear your mortgage. So there is no tax liability in case of death afaik. Who gave you this tax advice?
 
RainyDay said:
Seems strange to me - With a mortgage protection policy, the beneficiary of the policy is the financial institution who gave you the mortgage. The cheque goes to them and they clear your mortgage. So there is no tax liability in case of death afaik. Who gave you this tax advice?
Click to expand...
If the policy is level or convertible term rather than reducing term then perhaps there would be (capital acquisitions or income?) tax issues relating to the balance paid to the surviving partner or next of kin once the mortgage has been cleared? Apart from that and separate from the life assurance issue presumably there would be the normal capital acquisitions tax issues to be dealt with in the event that one partner died and the other inherited his/her share of the property? But this is irrelevant to the life assurance issue as far as I know. Aren't there plans afoot to normalise the tax situations of unmarried couples (same or opposite sex) to deal with some of these issues and treat them the same way as married couples? Any idea when the rules will be forumlated and brought in?
 
Just a bit confusing the whole thing.. What I really want to know is there any way of reducing.avoiding inheritance tax if you are unmarried but jointly own a property with someone?
 
I'm not sure if this represents the latest official thinking on this matter but it might be worth a read. As I said before I was under the impression that changes to the tax treatment of (same or different sex) cohabiting couples were imminent (perhaps in the latest Finance Bill?) but I could be completely wrong here...
 
You must log in or register to reply here.
Back
Top