Unmarried Partners Get No Spouse Exemption From Inheritance Tax

Yes — an unmarried partner's estate can be left with an inheritance tax bill in exactly the situation where a married couple's estate would have nothing to pay. Twenty years together, a home you both treated as shared, children in common: none of it changes the answer. Whether unmarried couples pay inheritance tax when one dies comes down to a single rule, and that rule turns entirely on whether there was a marriage or a civil partnership. There is no half-measure for a long relationship.

The rule is the spouse exemption. Anything left to a husband, wife or civil partner passes free of inheritance tax, with no upper limit at all. Anything left to a partner you were not married to gets none of that relief. Your partner's estate falls back on the ordinary allowances that every estate has, and once those are used up the tax is charged at 40% — on money a married couple in the identical position would have passed between them with nothing to pay.

That is the whole of the difference, and it is worth understanding precisely, because the gap is wider than most cohabiting couples expect and it grows again on the second death. This page sets it out in cash terms on one identical estate, explains the allowance the survivor of an unmarried couple can never inherit, and covers what you can still do about it.

The short answer: the spouse exemption is the entire difference

Both of you, married or not, have the same basic allowance against inheritance tax. What a married couple has on top is the ability to hand everything to each other with no tax charged at the first death, and to combine their allowances so that far more can eventually pass to the next generation. An unmarried couple has neither of those things.

So the sequence for a married couple is that the first death produces no inheritance tax at all, because the whole estate passes to the survivor under the spouse exemption. The tax question is simply postponed to the second death, and even then the couple's combined allowances soften it. For an unmarried couple, the first death is a taxable event in its own right: whatever passes to the surviving partner above the available allowance is taxed at 40%, then and there, at the very moment the survivor is least able to find the money.

Nothing about how the relationship felt, how the bills were split, or whose name was on what changes this. The tax code recognises a marriage or a civil partnership, and it recognises nothing else in its place.

The allowances every estate gets — and the one only marriage unlocks

Every estate, whether the person was married or not, has a tax-free band called the nil-rate band. It is set at £325,000. On top of that there is a residence nil-rate band of up to £175,000, which can apply when a home is left to direct descendants — more on that below, because it is where the unmarried couple often loses out twice. Above the allowances that apply, inheritance tax is charged at 40%.

Source: HM Revenue & Customs, How Inheritance Tax works: thresholds, rules and allowances, gov.uk.

The allowance a married couple gets and an unmarried couple does not is the transferable nil-rate band. When a spouse or civil partner dies and does not use all of their nil-rate band — which is usually the case, because everything passed to the survivor tax-free — the unused portion transfers to the survivor. On the second death the survivor's estate can therefore have up to two full nil-rate bands available, and, where a home passes to children or grandchildren, up to two residence bands as well.

The survivor of an unmarried couple gets none of that transfer. They keep only their own single nil-rate band. So the loss is not just the exemption on the first death; it is the second allowance that a married survivor would have carried forward and an unmarried survivor never receives. That lost transferable band is frequently the larger part of the total gap between the two positions.

The house is usually where it bites

For most couples the home is by far the largest thing they own, and property values are exactly why an ordinary, unremarkable estate can breach the nil-rate band. Across large parts of the country a typical home is worth a substantial fraction of the £325,000 band on its own, and in London and much of the South East it exceeds it comfortably before any savings are added.

Source: HM Land Registry, UK House Price Index, published under the Open Government Licence v3.0.

The residence nil-rate band is meant to take some of the sting out of that, but it comes with a condition that catches unmarried couples squarely. It applies only where the home is "closely inherited" by direct descendants — children, grandchildren and the like. A surviving partner is not a direct descendant. So if your partner leaves the home to you, the residence band is not available on that transfer at all, and only the ordinary £325,000 band shelters it.

That leaves an unmarried couple with a genuine bind. Leave the home to the surviving partner and you keep them in the house but forfeit both the spouse exemption and the residence band, exposing everything above £325,000 to 40%. Leave the home to the children instead and the residence band can apply — but then the surviving partner does not get the home. A married couple never has to make that choice, because the spouse exemption covers the first death whatever the will says.

What the gap looks like in cash

Take one estate and hold everything about it constant except the marriage. Say it is a home worth £400,000 and £50,000 in savings — £450,000 in total — and the whole of it is to pass to the surviving partner. The figures below are an illustration of how the allowances apply, not a quote for any particular estate.

If the couple were married, the spouse exemption covers the lot. The inheritance tax on the first death is nothing. The question is deferred, and the couple's combined allowances are there to meet it later.

If the couple were not married, the estate has one nil-rate band of £325,000 to set against £450,000. The residence band does not apply, because the home is going to a partner rather than to descendants. That leaves £125,000 taxed at 40% — an inheritance tax bill of £50,000, due from an estate whose main asset is the house the survivor is living in.

Source: HM Revenue & Customs, How Inheritance Tax works: thresholds, rules and allowances, gov.uk (allowances and rate); the worked figures are illustrative arithmetic applying those rules.

Fifty thousand pounds is a lot to find when the largest asset is bricks and mortar and the survivor's income has just halved. This is the position that most often forces a sale, and it is the same squeeze — a tax bill that has to be paid before anyone can inherit, from an estate whose value is locked up in property or a business — that lands on families who are asset rich but cash poor and have to sell to pay the tax. A married couple simply does not meet it on the first death.

"Common law marriage" is a myth, and it can cost twice

Many couples believe that after enough years together the law treats them as good as married. It does not, anywhere in the United Kingdom. There is no such thing as a common law wife or common law husband for tax, and none for inheritance either. Living together, buying a home together and raising children together create no spouse exemption, no transferable allowance and no automatic right to inherit.

That last point is the second cost. If your partner dies without a will, the intestacy rules decide who inherits, and an unmarried partner is not on the list. The estate passes to blood relatives — children, then parents, then siblings — and the surviving partner can be left with nothing from the estate at all, on top of the tax problem. A will is what stops that, and it is the single most important document an unmarried couple can put in place.

Where a cohabiting partner has been left out or under-provided for, they may be able to apply to the court for reasonable financial provision, in England and Wales under the Inheritance (Provision for Family and Dependants) Act 1975, provided they lived with the deceased as a couple for at least two years before the death or were being maintained by them. It is a claim, not a right, and it is far slower and more uncertain than simply having a valid will. Free, impartial guidance on wills and what happens without one is available from MoneyHelper and Citizens Advice.

What you can still do about it

There are a handful of things that genuinely move the position, and they are all easier to arrange now than they will ever be later.

• Marry or form a civil partnership. This removes the tax problem at a stroke: the spouse exemption and the transferable allowances all follow automatically. It is not for everyone, but it is the only step that makes the gap disappear entirely. There is a wrinkle worth knowing where one partner is not a long-term UK resident, which changes how the exemption works — we cover that in marrying a partner who is not long-term UK resident.
• Make wills. Without them the survivor may inherit nothing under intestacy. A will is what makes the rest of this planning possible in the first place.
• Arrange life cover written in trust. A policy held in trust pays a lump sum to the survivor outside the estate, quickly, without waiting for probate and without adding to the taxable estate itself. That cash can meet the 40% bill so the survivor is not forced to sell the home to pay it. Because the sum needed is broadly fixed — the tax on a known estate — a level term policy is the usual shape for this. The mechanics of a policy paying the family before the grant are set out in claiming on a life policy before the grant arrives.

If you want to see what cover written for this purpose would involve, you can get life insurance quotes and have an FCA-authorised broker size a policy against the tax your partner's estate would actually face. Whether an application is accepted, and on what terms, depends on underwriting.

One further point of timing: the same married-versus-unmarried gap is about to open up on pension pots as well, which for many people are their largest asset after the house. We explain the change and what it means for a cohabiting partner in why your widow pays no inheritance tax on your pension but your partner does. Handling the estate's other pressures early helps too, since bills such as care home fees that were still outstanding when someone died rank as estate debts and come out before anyone inherits.

Scotland and Northern Ireland

Inheritance tax itself is the same across the whole of the United Kingdom. It is a tax set by Westminster, so the spouse exemption, the £325,000 nil-rate band, the residence band and the 40% rate apply identically in Scotland and Northern Ireland. The unmarried couple is in the same tax position wherever they live.

What differs is the law on who inherits and what the survivor can claim. In Scotland a surviving cohabitant has no automatic prior rights or legal rights in the estate — those belong to a spouse or civil partner and to children — but they can apply to the court for a discretionary payment under the Family Law (Scotland) Act 2006. That application has a strict deadline, and it must be made within six months of the death, so it is not something to leave. In Northern Ireland the succession and intestacy rules run separately again, with a court-based claim for provision available under the Inheritance (Provision for Family and Dependants) (Northern Ireland) Order 1979, broadly mirroring the position in England and Wales.

None of these routes changes the tax; they affect only whether, and how much, an unmarried survivor receives in the first place. You can read the wider topic in our guide to probate, the estate and inheritance tax.

Frequently asked questions

Do unmarried couples pay inheritance tax when one dies?

They can. Assets passing between spouses and civil partners are exempt from inheritance tax without any limit; assets passing to an unmarried partner are not. The estate relies on the ordinary allowances alone — chiefly the £325,000 nil-rate band — so a home and savings that a married couple would have passed between them tax-free may be taxable at 40% above the allowance when the couple were not married.

Is there such a thing as a common law wife in the UK?

No. Living together, however long, and having children together give no automatic inheritance or tax status in England, Wales, Scotland or Northern Ireland. The spouse exemption, the transferable allowance and intestacy rights all depend on a marriage or civil partnership being in place. A cohabiting partner may be able to bring a court claim for provision, but that is slower and less certain than a valid will.

Can an unmarried partner inherit an unused allowance?

No. The transferable nil-rate band is available only to a surviving spouse or civil partner. When the survivor of an unmarried couple later dies, any unused allowance from the first death is simply lost rather than carried forward, and that lost allowance is often the larger part of the gap between the married and the unmarried position.