With this ring, we shall be taxed

Two live as cheaply as one? It doesn't always work that way

THE Archbishop of York last week attacked government tax rules which he claims are a disincentive to get married. In a television appeal, Dr John Habgood said that in recent years legislation had gone too far in efforts not to disadvantage the illegitimate, and to treat cohabiting couples generally as if they were married.

``Those who are looking at the possibilities of different lifestyles see no particular interest for themselves in actually getting married,'' he said.

With the ever-increasing trend towards cohabiting outside wedlock, tax and benefits policy has indeed been moving to a more neutral stance. Inconsistencies remain, however, in the fiscal and benefit treatment of married and unmarried couples. Some inducements remain for couples to tie the knot. Other measures may encourage a couple not to do so.

Married couples' allowance, which provides extra tax relief for couples who formalise their commitment to one another, applies to £1,720 per annum of income, but the value of the allowance was slashed from 25 per cent to 20 per cent last April, and actually cuts bills this year by a fifth, or £344; and from this April benefit will be reduced to 15 per cent, worth just £258 a year. But unmarried couples have no such entitlement, unless they have children. Cohabitants with children, and lone parents, are entitled to additional person allowance, which gives the same level of help as the married couples' allowance.

Mortgage interest relief favours married couples if they purchased properties together after 1988, when Nigel Lawson abolished double taxation relief. Where the property is owned jointly by married couples, tax relief may be allocated flexibly between the partners. If owners merely cohabit, benefit is halved rigidly between them. If one partner does not work and the other pays all the mortgage, half the relief is lost.

On the other hand, if unmarried partners bought before the 1988 watershed, it may not be in their interest to marry now. In 1988 relief was switched from a maximum of £30,000 per individual owner living in a property to £30,000 total on the property itself. Couples who bought before the rule change maintain their separate relief, now at most £501. If they marry, they lose it.

When mortgage interest relief drops to 15 per cent in April however, maximum relief will fall to £375 a year, at current interest rates. So disparities to do with marital status will also narrow.

Married couples do better out of capital gains tax and inheritance tax rules, with tax-exempt transfers between man and wife. Couples with high financial gains can move assets between themselves to maximise CGT allowances - currently at £5,800 per person, rising to £6,000 next April. Common- law couples get no special CGT or inheritance treatment, and a partner can face heavy tax bills on the death of the other.

A further factor militating against couples getting wed is maintenance payments. These are subject to tax relief at the same level as the married couples' allowance. Relief is withdrawn, however, if the person receiving maintenance remarries.

The DSS also ensures that there are no advantages in having a marriage certificate if claiming income support, family credit, or related benefits. ``Our definition is if you're living with someone, they are considered your partner,'' said Richard Brooks, a spokesman.

In fact, when people live together as partners the income support bill falls from £45.70 each (for individuals over 25) to £71.70 total, the couple's rate.

Family credit payments do not discriminate between two-parent and lone- parent families. State pensions, however, penalise unmarried women when their partners die. These pensions recognise a woman's entitlement to continued payment of a spouse's pension only if the couple were man and wife. Similarly, only married women are eligible for widows' benefits, though there is now a similar entitlement for widowers.