Do unmarried couples pay more inheritance tax?
In most cases, yes. The reason is structural rather than a penalty aimed at cohabitants: UK inheritance tax gives married couples and civil partners two powerful reliefs that unmarried couples cannot use. The first is the unlimited spouse and civil partner exemption, which lets one partner leave their entire estate to the other with no IHT to pay. The second is the ability to transfer any unused nil-rate band and residence nil-rate band to the survivor. Together these let a married couple pass on up to £1 million between them before IHT bites.
Neither relief is available to cohabiting partners, however long you have been together and whether or not you own a home and raise children jointly. The concept of a "common law marriage" has no legal standing in England and Wales. So on identical wealth, an unmarried partner can face a 40% charge on everything above the nil-rate band where a spouse would have paid nothing.
A simple illustration shows the gap. Suppose one partner dies leaving an £825,000 estate entirely to the other. A surviving spouse or civil partner pays no IHT because of the spouse exemption. An unmarried survivor, by contrast, gets one nil-rate band of £325,000, leaving £500,000 taxable at 40%, an IHT bill of £200,000. Same money, same intentions, a £200,000 difference driven purely by relationship status.
No spouse exemption: the core problem
The spouse or civil partner exemption is the single most valuable relief in the IHT system. HMRC's rules confirm it applies to transfers between people who are lawfully married to each other, including same-sex marriages, and to transfers between people who are registered civil partners. It does not extend to unmarried or cohabiting partners, engaged couples, or people who describe themselves as "common law" spouses.
For an unmarried couple this means a gift on death from one partner to the other is a chargeable transfer. The estate benefits from the standard nil-rate band of £325,000, and potentially the residence nil-rate band of up to £175,000 if a qualifying home passes to direct descendants (children or grandchildren, not the partner). Everything above the available bands is taxed at 40%, or 36% if at least 10% of the net estate is left to charity.
- Married or civil partner beneficiary: unlimited exemption, no IHT on what passes to them.
- Unmarried partner beneficiary: no exemption; only the nil-rate band (and possibly the residence nil-rate band, if the home passes to descendants) shelters the estate.
- The 40% rate applies to the excess above the available bands; 36% if the 10% charity condition is met.
The residence nil-rate band adds a wrinkle for cohabitants. It is only available where a qualifying residence passes to direct descendants, so leaving your share of the home to your partner rather than to your children can mean this band is lost. The band is also tapered away by £1 for every £2 by which the net estate exceeds £2 million, so larger estates lose it regardless.
No transferable nil-rate band or RNRB
When a married person or civil partner dies without using all of their nil-rate band, the unused percentage can be transferred to the survivor and claimed on the second death. The same transfer applies to the residence nil-rate band. This is how a couple combines two £325,000 nil-rate bands and two £175,000 residence nil-rate bands to shelter up to £1 million.
Unmarried couples cannot transfer either band to each other. Each partner has their own single nil-rate band of £325,000, and each estate stands alone. There is no mechanism to move an unused allowance from a deceased partner to a surviving one. The practical effect is that an unmarried couple has, at most, the reliefs of two separate individuals, never the combined £1 million a married couple can reach.
- Married couple / civil partners: up to £325,000 + £325,000 nil-rate bands, plus up to £175,000 + £175,000 residence nil-rate bands, reaching up to £1 million combined.
- Unmarried couple: two entirely separate estates, each limited to its own £325,000 nil-rate band (plus any residence nil-rate band that qualifies on that death alone).
- No unused percentage can pass from a deceased unmarried partner to the survivor.
All of these figures are frozen. The £325,000 nil-rate band, the £175,000 residence nil-rate band and the £2 million taper threshold are fixed at these levels until 5 April 2031. The freeze was extended to April 2030 at the Autumn Budget 2024 and later fixed for one further year to April 2031. As estates grow while the bands stand still, the exposure for unmarried couples widens each year.
The intestacy trap: no will, no inheritance
Inheritance tax is only half the danger. The other half is who inherits at all. If you die without a valid will, the intestacy rules of England and Wales decide who receives your estate, and those rules do not recognise an unmarried partner. A cohabitant inherits nothing automatically, regardless of whether you have been together for two years or thirty, share a home, or have children together.
Instead, your estate passes to your relatives in a strict order: children first, then parents, then siblings, and onward to more distant family. Your partner can be left with no legal claim to the home you shared, the savings in your sole name, or your possessions, even where you had always intended everything to go to them. Assets held as joint tenants (rather than tenants in common) can pass automatically to the survivor by survivorship, but anything in your sole name follows the intestacy rules.
A surviving cohabitant does have one route: a claim under the Inheritance (Provision for Family and Dependants) Act 1975 for reasonable financial provision. But this generally requires that you lived together as a couple for at least two years immediately before the death, and a court claim is slow, costly, uncertain and stressful at the worst possible time. It is a backstop, not a plan.
The fix is straightforward and inexpensive by comparison: a valid, up-to-date will. A will is the only reliable way to make sure your partner inherits what you intend, and it lets you structure gifts to use the reliefs that are available to you.
How to reduce the exposure
Unmarried couples cannot access the spouse exemption, but several established steps still reduce the IHT bill and, just as important, make sure assets reach the intended person. These should be considered together as part of a coordinated plan rather than in isolation.
- Make a will. This is the foundation. It overrides intestacy, ensures your partner inherits, and lets you direct assets to use the nil-rate band and, where a home passes to descendants, the residence nil-rate band.
- Write life insurance in trust. A life policy written in trust pays out to your chosen beneficiary outside your estate, so the proceeds are not added to your estate for IHT and are not taxed as part of it. This is a common way for unmarried couples to provide a lump sum that covers the IHT bill, letting the survivor keep the home rather than sell it to pay HMRC. Placing an existing policy in trust is usually simple and free to arrange with the insurer.
- Use lifetime gifts and the 7-year rule. Outright gifts to your partner are potentially exempt transfers. If you survive seven years after making the gift, it falls out of your estate entirely. Die within seven years and it is brought back in, though taper relief can reduce the tax on gifts made between three and seven years before death (where cumulative gifts exceed the nil-rate band). The annual exemption of £3,000 (which can carry forward one unused year), small gifts of up to £250 per person, and regular gifts out of surplus income are all useful, exempt from the outset.
- Consider trusts. Placing assets in trust can help provide for a partner while keeping some control and, in the right circumstances, keeping value outside an estate. Trusts have their own IHT rules and can carry entry, ten-year and exit charges, so specialist advice is essential before setting one up.
- Review how you own your home. Whether property is held as joint tenants or tenants in common affects what happens on death and how the reliefs apply. This should be reviewed alongside your wills.
On timing, remember that IHT is normally due by the end of the sixth month after the month of death, and HMRC charges interest after that. Tax attributable to land and buildings can be paid in yearly instalments over 10 years, which can ease pressure on a survivor who needs time to raise funds, though interest usually applies. Life insurance in trust is often the cleanest way to avoid a forced sale.
Should you marry or form a civil partnership?
Marriage or a civil partnership is the most complete solution to the IHT problem, because it unlocks the unlimited spouse or civil partner exemption and the transferable nil-rate band and residence nil-rate band. From the date of the ceremony, transfers between you are exempt and, on the second death, the couple can pass on up to £1 million between them. It also gives the survivor rights under the intestacy rules, though a will is still strongly advisable.
Civil partnerships are open to both opposite-sex and same-sex couples, so this route does not require a wedding in the traditional sense. For couples who are financially entwined but have chosen not to marry, this is worth weighing honestly against the potential tax cost, which, as the earlier example showed, can run to hundreds of thousands of pounds.
That said, marriage or civil partnership is a significant personal decision, not a tax product, and it carries wider legal and financial consequences on separation and death. It is not the right answer for everyone. Where a couple prefers to remain unmarried, the combination of a will, life insurance in trust and planned lifetime gifting can substantially reduce the exposure even without the spouse exemption. The key point is to decide deliberately rather than leave the outcome to intestacy and a 40% charge by default.
