Inheritance Tax and Unmarried Couples: The Cost of Not Being Married

It may not be the most romantic reason to get married, but it is a very real one and one we discuss with clients often. Recent reports have highlighted Ricky Gervais’ suggestion that inheritance tax could be the reason he finally marries Jane Fallon after more than 40 years together. Whether or not celebrity tax planning is your usual morning reading, the story neatly illustrates a point many couples only discover when it is too late. Unmarried partners are not treated in the same way as spouses or civil partners for inheritance tax purposes.

Inheritance tax: the basic position

Inheritance tax is charged on the value of a person’s estate when they die. Broadly, everyone has a nil-rate band, currently £325,000, meaning that the first £325,000 of their estate can usually pass free of inheritance tax. Anything above the available allowances may be taxed at 40%, subject to additional exemptions and reliefs.

That is where marriage and civil partnership become important. For inheritance tax purposes, the law gives spouses and civil partners valuable protections which do not apply to unmarried couples, however long they have been together, however committed the relationship, and however intertwined their finances may be.

The spouse exemption: no inheritance tax on assets left to a spouse or civil partner

The key benefit is the spouse exemption. In most cases, anything left to a surviving spouse or civil partner is exempt from inheritance tax, regardless of value. This means that, on the first death, a married person or civil partner can leave their estate to the survivor without triggering an inheritance tax bill at that stage.

By contrast, if an unmarried partner inherits, they are treated like any other beneficiary. They do not benefit from the spousal exemption. If the estate exceeds the available inheritance tax allowances, tax may be payable even if the couple have lived together for decades.

Transferable allowances: preserving tax-free bands for the second death

Marriage and civil partnership can also help preserve unused inheritance tax allowances. If the first spouse or civil partner to die leaves everything to the survivor, their nil-rate band is often unused because the transfer is exempt. The unused percentage can then be transferred to the survivor’s estate when they later die.

In practical terms, this can allow a married couple or civil partners to combine their nil-rate bands, potentially protecting up to £650,000 from inheritance tax on the second death. Where a qualifying home passes to direct descendants, the residence nil-rate band may also be available. This is currently up to £175,000 per person, meaning some married couples or civil partners may be able to pass up to £1 million free of inheritance tax, subject to the detailed rules and tapering for larger estates. From 6 April 2026, a new £2.5 million allowance will apply to the combined value of assets qualifying for 100% Business Property Relief and/or Agricultural Property Relief. Any unused part of that allowance can be transferred to a surviving spouse or civil partner, potentially allowing a couple to benefit from up to £5 million of qualifying business or agricultural assets attracting 100% relief.

What about couples who simply live together?

This is where the law can feel out of step with modern relationships. Many couples live together, own property together, raise children together and share finances, but unless they are married or in a civil partnership, they do not receive the same inheritance tax treatment. There is no such thing as a “common law spouse” for inheritance tax purposes.

For cohabiting couples, this can create difficult outcomes. The survivor may face an inheritance tax bill at the very point they are dealing with bereavement, property arrangements and financial uncertainty. If there is no valid will, they may also find that they do not automatically inherit under the intestacy rules.

Marriage is not a complete inheritance tax plan

Getting married or entering a civil partnership can be highly valuable from an inheritance tax perspective, but it is not a complete estate planning strategy. The spouse exemption normally defers inheritance tax rather than removing it altogether. When the surviving spouse or civil partner dies, inheritance tax may still be payable on their estate, depending on its value, the available allowances and who inherits.

Couples should also consider whether their wills are up to date, how property is owned, whether lifetime gifts are appropriate, whether business or agricultural reliefs may apply, and whether pensions, life policies or trusts need reviewing. For some families, equalising assets between spouses or civil partners can also be an important part of wider planning.

So, is marriage the most tax-efficient declaration of love?

Perhaps not the most romantic proposal line, but for inheritance tax purposes it can be a powerful one. The Ricky Gervais story may raise a smile, but the legal point is serious. Long-term cohabitation does not provide the same protection as marriage or civil partnership.

If you are living with a partner, are considering marriage or civil partnership, or want to understand how inheritance tax could affect your family, now is the time to review your arrangements. Our Wills & Estates team can help you put the right protections in place, from Wills and estate planning to inheritance tax advice, property ownership and provision for unmarried partners.

For clear, practical advice tailored to your circumstances, please get in touch with us to arrange an initial conversation by calling 01206 574431 or emailing enquiries@tsplegal.com.