In modern Britain, many couples build long term, committed lives together without ever formally marrying. That is, of course, a personal choice. However, when it comes to Inheritance Tax, the law has not kept pace with that shift.
Inheritance Tax rules for married and unmarried couples explained
One of the most significant advantages of marriage or civil partnership is the Inheritance Tax exemption between spouses. When one partner dies, assets can pass to the surviving spouse free of Inheritance Tax, regardless of value.
For unmarried couples, the position is very different. No matter how long you have been together, transfers between partners can be taxed at 40 per cent above the available thresholds. This can create a substantial and often unexpected liability.
Marriage also allows couples to combine their nil rate bands, meaning up to £1 million can potentially pass free of Inheritance Tax, subject to the residence nil rate band. Unmarried couples simply do not have access to this.
How to protect your partner and reduce inheritance tax liability This is not just theory. We regularly see clients come in for estate planning advice, only to realise the exposure they face. In many cases, those conversations are followed fairly quickly by a trip to the registry office.
Interestingly, this came to mind while watching At Home with the Furys. It highlights how even high net worth individuals, such as Tommy Fury and Molly-Mae Hague, can build significant wealth and families without marrying, yet still be exposed to a potentially large Inheritance Tax bill.
Marriage is not for everyone, and it should never be purely a financial decision. But from a planning perspective, it remains one of the simplest and most effective ways to protect your partner.
Speak to our inheritance tax planning team today
If you are in a long term relationship and have built up assets, it is worth understanding the position.
Our private client team provides clear, practical advice on inheritance tax planning, wills, and protecting your partner’s future. We will review your circumstances, explain your options in plain English, and help you put the right structure in place.
Contact us today to arrange a confidential discussion and take the first step towards securing your estate for the people who matter most.
Frequently Asked Questions
Usually, assets can pass from one spouse or civil partner to the other free from Inheritance Tax, provided the relevant conditions are met. The spousal exemption is one of the significant Inheritance Tax advantages of marriage and civil partnership. The position can be very different for unmarried couples, as there is no equivalent spousal exemption simply because a couple have lived together for many years.
Under the current rules, unmarried couples do not receive the same Inheritance Tax exemptions as married couples or civil partners. If one partner dies and leaves assets to the other, the value of those assets may be subject to Inheritance Tax if the estate exceeds the available tax-free allowances. The length of the relationship does not, by itself, create a spousal exemption.
Marriage can provide significant Inheritance Tax advantages because assets can generally pass between spouses free of Inheritance Tax. It can also allow certain unused allowances to be transferred to the surviving spouse. However, marriage should not be viewed solely as an Inheritance Tax planning strategy. The most appropriate approach will depend on your assets, family circumstances, property ownership and estate planning arrangements. You should also consider consulting a family lawyer before marriage, who may provide you with advice regarding prenuptial agreements.
Unmarried couples may be able to reduce their potential Inheritance Tax liability through careful estate planning. Depending on their circumstances, this may include making appropriate Wills, reviewing property ownership, making lifetime gifts and considering trusts or other estate planning arrangements. Professional advice is particularly important where substantial property, investments, business interests or other significant assets are involved.
If you are an unmarried couple or married couple with significant assets, professional Inheritance Tax planning can help you understand how the rules may affect your estate. Harold G Walker Solicitors provides Wills, estate planning and Inheritance Tax advice from offices serving Wimborne, Broadstone, Christchurch, Ferndown and Verwood helping individuals and families plan for the future and understand their options.
