Single people have got 99 financial problems, even though a partner ain’t one.
OK, I’ve cheekily adapted the lyrics of Jay-Z’s 2004 hit single, but if you are paying the “single tax”, I hope you will appreciate the shout out.
Life is more expensive if you live alone. It works out cheaper per person to split bills and housing costs (whether rent or mortgage) with a partner, sibling or friend — precisely what the term “single tax” was coined to describe. But as the cost of housing and utility bills continues to spiral, this financial disadvantage is becoming more entrenched.
There are all kinds of other ways couples have the upper hand financially over singles, from the tyranny of holiday operators charging single room supplements to gym membership deals for couples, discounted rail tickets and the puzzle of why a single person’s council tax discount is 25 per cent, not 50 per cent.
This week, two separate studies have shown how the cost of living crisis is having an outsized impact on the finances of single people across all levels of society — underlining that the “single tax” is a serious problem affecting millions of people, which policymakers urgently need to address.
The first study looks at levels of financial resilience — shorthand for how an unexpected cost could have an impact on your overall financial picture. Those living pay cheque to pay cheque will find it much harder to bounce back than those with savings set aside for a rainy day.
Although overall levels of financial resilience in the UK have improved since the pandemic, single households are lagging behind couples, according to the latest Hargreaves Lansdown Savings & Resilience Barometer, produced with Oxford Economics.
Single parents are at the sharp end of this trend. Nearly 71 per cent of single households with children had “poor” or “very poor” levels of financial resilience, the barometer found — more than twice the national level. Single parents have very little slack in the budget to cope with those rainy days, and only one in four have savings that could be accessed in an emergency, making them much more likely to borrow their way out of trouble.
“I was a single parent for quite a long time — it felt like bloody forever — and those years when I needed childcare, I was running on a deficit budget,” says Sarah Coles, head of personal finance at Hargreaves.
The Labour government faces its first big rebellion next week over the impact of the two-child benefit cap. Single-parent households make up 70 per cent of those affected.
Further up the income scale, Coles points out that single parents who cross the £100,000 income threshold face losing childcare benefits that a family with two earners of £99,999 would be entitled to keep.
Renting a home and being self-employed are two further factors that reduce financial resilience for single people, who lack the security of a partner’s income to help spread the load. Yet the barometer also warned that more pain is to come for the 1.5mn UK households refinancing a mortgage this year, as interest rates have remained “higher for longer” — a harder shock for a single person’s finances to absorb.
Singletons are not only finding it harder to save for a rainy day but also for bigger life goals, such as amassing a property deposit or making pension contributions — meaning the financial impact of their single years will persist even if they do go on to meet a partner.
Second, a separate study has found almost three in five adults living in financially vulnerable circumstances are single, according to research by Fair4All Finance.
Drilling into the details, the most financially disadvantaged groups include the growing number of single adults at or approaching retirement age whose health conditions prevent them from working as their savings dwindle; and younger singles who are renting, working in the gig economy and who rely on loans to manage the ups and downs of a sole income — a kind of credit that typically has high rates of interest attached.
Which highlights another of the 99 financial problems of being single — the greater risk of harming your credit score. Fair4All Finance found that in the past year, single adults in financially vulnerable circumstances were more likely to have had an application for credit rejected than couples.
Realising some of the financial advantages couples enjoy might make you look more favourably on your other half’s annoying habits (I have personally been fearing that the “summer of sport” will turn into the “autumn of divorce”).
But one of the reasons we cannot keep on ignoring the single tax is that more of us could end up paying it. Changing demographic trends mean that one-person households are increasing. The Office for National Statistics has previously estimated that by 2039, nearly one in seven people could be living on their own. As the new government starts a major housebuilding drive, this must be factored into the plans.
Single people who are able to buy a home on their own typically find it much harder to save for a property deposit, and cannot borrow as much as a couple. In my experience, this makes it more likely for single people to buy flats or shared-ownership properties, where they will also be on the hook for paying expensive monthly service charges. This makes it even harder for them to save or invest for the future. But try finding a one-bedroom freehold house to buy on Rightmove!
For decades, the volume housebuilders have favoured building family-sized homes and leasehold flats as these hit the sweet spot for profitability. But if the trend is moving towards more one-person households, where are these sorts of smaller homes going to come from? And if better-quality small homes were available, would this make it easier for older single people to downsize?
For now, younger singles are trying to work around the problem. Coreco, the mortgage broker, has seen an increase in borrowers pooling their resources and buying with friends or siblings. The good news is that mortgage lenders do not regard this as a higher risk, so will not charge higher rates of interest, says chief executive Andrew Montlake.
“However, it’s important that you get advice and have an open and honest discussion with your buying partner about what could happen if one of you wants to sell, and the other does not,” he says, adding he has seen some horror stories. “You are both jointly liable for the whole mortgage, not just your share, so if one party does not pay, the whole burden will fall on the other and both will have bad credit marks if it is not paid.”
For too long, the financial challenges single people face have been ignored by policymakers. It’s high time their needs were singled out for some proper attention.
Claer Barrett is the FT’s consumer editor and author of the FT’s Sort Your Financial Life Out newsletter series; claer.barrett@ft.com; Instagram and TikTok @ClaerB
