TAX BASICS

What is Civil Partnership in UK? – TaxTotal

A civil partnership in UK is a legally binding relationship that two people may enter into, which bestows upon them the rights and responsibilities of marriage. A civil partnership is not equivalent to marriage, but it can provide many of the same benefits. There are specific requirements for registering a civil partnership. For instance, partners cannot be related by blood or law.

What does a civil partnership mean?

A civil partnership in UK is a legal relationship that may form when two persons are not related to each other. Civil partnerships are open to both same-sex and opposite-sex couples. Once you register as a civil partnership, your relationship is legally recognizable. This gives you additional legal rights as well as duties. Once you’ve registered a civil partnership, you may only end it if one of you dies or if you ask the court to dissolve the relationship legally. You cannot seek to end a civil partnership until it has been in effect for at least one year.

Who can register a civil partnership

You can register a civil partnership in UK, if you satisfy the following requirements:

  • You are both at least 16 years old. If you are 16 or 17, you must typically get formal permission from your parents or legal guardians.
  • You have spent at least seven days in the exact location of England or Wales.
  • If you are neither a civil partner nor a married couple.
  • You are not a close relative by blood.

What’s the difference between civil partnership and marriage?

Civil partnerships and marriages are similar, yet there are some key distinctions. Although both have significant legal advantages, the precise legal details differ. One significant legal distinction to be aware of is that. A civil partnership is similar to marriage for many same-sex and opposite-sex couples in the UK. However, it does not entail all of the legal duties of marriage. As a result of the various legal status and privileges that a civil partnership provides, a couple may opt to register a civil partnership rather than legally marry.

A civil partnership certificate may only be acceptable in limited circumstances. Whereas the UK marriage certificate is globally recognizable. A civil partnership certificate may only be acceptable in limited circumstances. Another distinction is the grounds on which a person in a civil partnership may request the dissolution of the partnership. In contrast, a married couple member can file for divorce if adultery is committed. A person in a civil partnership is not permitted to cite adultery as a reason for dissolution and must demonstrate their reasoning in another way.

Differences in survivor benefits (if one spouse dies) and state pensions exist between civil partnerships and marriages. In general, married couples have more flexible choices for obtaining benefits and pensions if one of them dies. However, the regulations governing same-sex civil partnerships vary and often mirror those governing married opposite-sex couples. This isn’t always the case. Therefore it’s essential to research the specific distinctions before choosing marriage or a civil partnership.

Dissolution of a civil partnership

You must go to court for a dissolution order if you wish to formally terminate your civil relationship. Before you may seek dissolution, your civil partnership must have lasted at least one year. You must show to the court that the civil relationship has ‘irretrievably’ broken down permanently. You must be able to demonstrate at least one of the following:

  • your partner has acted irrationally
  • you and your partner have been apart for two years, and both consented to the dissolution
  • You and your partner have been apart for at least five years if only one of you agrees to the divorce.
  • Your partner abandoned you at least two years ago.

What are the tax advantages of a Civil Partnership?

There are a few tax allowances and advantages that you can utilize to reduce your tax bill. The marriage allowance and the married couples tax allowance are two such benefits for couples. You can read more about them from our articles. You can also transfer assets with no capital gains or inheritance tax.

Capital Gains Tax

Being able to transfer assets free of capital gains tax may be a strategy. To ensure that each civil partner’s capital gains tax yearly exemption is not used prior to the sale of an asset for capital gains tax purposes. The yearly exemption is the maximum amount of profits that a person can earn before paying any capital gains tax. The sum for 2020/21 is £12,300.

For example, one civil partner has a £300,000 investment property that was acquired for £200,000. In that case, the potential gain is £100,000. Suppose the property is sold after subtracting the yearly exemption and assuming there are no further chargeable disposals in the same tax year. In that case, £87,700 is subject to capital gains tax at the applicable rates. However, suppose half of the property is transferred to the other civil partner prior to sale. In that case, it may be possible to claim two-yearly exclusions, decreasing the entire gain subject to capital gains tax from £87,700 to £75,400.

It is also worth noting that there is no stamp duty or stamp duty land tax on gifts between civil partners.

Inheritance Tax

When it comes to inheritance tax, civil partners have an advantage over other couples who are not in a civil partnership or marriage in the following ways:

  • In the event of death, if the surviving civil partner is domiciled in the UK, assets passes on to the surviving spouse free of inheritance tax.
  • The surviving civil partner may inherit any unused portion of the deceased’s civil partner’s nil-rate band (and main residence nil-rate band).
  • Civil partners can give lifelong gifts to one other and will be exempt from inheritance tax. However, gifts made between couples who are not in a civil partnership or marriage may be subject to inheritance tax if the individual making the gift dies within seven years of the date of the gift.

Sidharth Bharthan Menon
CEO, taxtotal​