'Couple penalties’ in tax and benefit system are widespread, but almost impossible to eliminate

30 April 2010

'Couple penalties’ in tax and benefit system are widespread, but almost impossible to eliminate

The majority of people in the UK would receive more financial support from the state if they were single (or told the authorities they were single) than if they were married or part of a cohabiting couple, according to new research published by the IFS and funded by the Nuffield Foundation.

Two adults can almost certainly save on living costs by living together, but unlike some past research, this study does not try to measure the overall benefits or costs to living as a couple compared with living apart.

The study's findings cannot tell us whether couples would be better off living apart than living as a couple. It simply measures how net state support varies by family situation. Whether the tax and benefit system is currently fair to couples compared with single adults, or whether it would be any fairer if there were fewer or more couple penalties, is in the eye of the beholder.

Why do 'couple penalties' arise?

So-called 'couple penalties' in the tax and benefit system arise chiefly because much state support is means-tested against the joint income of a couple, rather than an individual's own income. Existing couple penalties could be reduced, and some couple premiums created, by increasing benefits and tax credits for couples or cutting them for single adults. But eliminating all couple penalties and premiums in the tax and benefit system can be done only by assessing all benefits, tax credits and taxes against an individual's circumstances. Unless benefit rates for single adults are cut, the cheapest way of doing this would cost around £34 billion a year, and doing so would introduce new distortions that might be worse than those that would be removed.

Download report

Download the full report on the IFS website

The Nuffield Foundation has funded this work, but the views expressed are those of the authors and not necessarily the Foundation.