Your Widow Pays No IHT On Your Pension. Your Partner Does.

From April 2027 the answer to whether your unmarried partner will pay inheritance tax on your pension is, in most cases, yes, where a married spouse in the identical position would pay nothing. That is not a quirk of your scheme or a mistake on a form. It is how the inheritance tax rules are built, and the change taking effect on 6 April 2027 brings pensions squarely inside those rules for the first time.

The reason is a single relief called the spouse exemption. Transfers between a husband and wife, or between civil partners, pass free of inheritance tax. A couple who have lived together for thirty years, raised children together and pooled every penny do not have it, because in the eyes of the tax system they are not married. Until now that gap has mostly affected houses and savings. From 2027 it reaches the pension too.

This page sets the two households side by side: same home, same pot, same life together, one married and one not, and works through what each partner is actually left with once the tax is settled. It is not comfortable reading, but it is better known now, while there is time to act, than discovered by a grieving partner opening a letter from HMRC.

The short answer: the exemption is for spouses

Inheritance tax has always treated married couples and civil partners differently from everyone else. When one spouse dies, anything they leave to the other passes free of inheritance tax, without limit. It is the single most valuable relief in the system, and it is the reason most married couples pay no inheritance tax on the first death at all.

A cohabiting couple, however long together, sit entirely outside it. The law does not recognise a common-law marriage for this purpose; there is no such thing in England and Wales. So when an unmarried person dies and leaves their estate to their partner, that partner is treated, for inheritance tax, exactly like a stranger receiving a gift. The relationship counts for nothing in the calculation.

What changes from 2027 is not the exemption. It is what the exemption is being applied to. By pulling unused pension funds into the estate, the new rules take an asset that used to sit outside inheritance tax entirely and place it inside, where the spouse exemption either covers it or does not, depending on who you married.

What changes on 6 April 2027

Under the rules in force until then, most unused defined contribution pension pots pass outside the estate for inheritance tax, because they are held under trust and paid at the discretion of the scheme. That is why pensions have long been treated as an efficient way to pass wealth on. From 6 April 2027 that treatment ends for most unused pension funds and lump sum death benefits, which are brought into the value of the estate and assessed for inheritance tax in the normal way.

The wider design of the 2027 change, including what is caught and what is not, is worth reading in full, and we set it out in a guide to how an unused pension pot is heading into the taxable estate. The point for an unmarried couple is narrower and sharper. Once the pot is inside the estate, the only thing standing between it and a 40% charge is a relief the couple cannot use.

Source: HM Treasury and HMRC, Inheritance Tax on unused pension funds and death benefits from 6 April 2027, impact and policy documents, published under the Open Government Licence v3.0.

Why the spouse gets the exemption and the partner does not

It helps to be precise about what the exemption is and is not. The spouse and civil partner exemption is preserved under the 2027 changes, which the government has confirmed. So a pension pot left to a widow or a surviving civil partner passes free of inheritance tax, just as the rest of the estate does. Nothing about bringing pensions into the estate takes that relief away from married couples.

An unmarried partner has none of it. They also miss a second advantage: a married couple can transfer any unused nil-rate band from the first death to the second, effectively doubling the tax-free amount available on the survivor's estate. Cohabiting partners cannot transfer anything to each other, so each estate stands alone with a single nil-rate band.

There is a further trap specific to a home. The residence nil-rate band, an extra slice of inheritance tax relief, only applies where a main residence passes to direct descendants such as children or grandchildren. A surviving partner is not a direct descendant, so leaving the home to a partner does not attract it. The disadvantages stack. We look at the wider version of this beyond pensions in a guide to unmarried partners and inheritance tax, and the exemption they do not have.

The arithmetic: two identical households, one pot

Set two couples next to each other. Same house, same savings, same unused pension pot. In each, one person dies and leaves everything to the other. The only difference is that one couple is married and one is not.

Take the pension pot alone, and suppose the rest of the estate has already used up the available nil-rate band, so the pot sits entirely in the taxable part of the estate. Inheritance tax is charged at 40% on value above the nil-rate band, which is £325,000. On a £300,000 pension pot falling wholly above that band, the tax is £120,000 for the unmarried partner and nothing for the married spouse, because the spouse exemption removes the charge altogether. Same pot, same household, a £120,000 difference decided by a marriage certificate.

The figures move with the size of the estate and how much nil-rate band is left, and the residence nil-rate band can add up to a further £175,000 of relief where a home passes to children, though not to a partner. But the shape of the result does not change: the married survivor keeps the pot, and the unmarried survivor keeps it less 40% of the taxable slice. This is an illustration of the mechanism, not a calculation of your own position, which depends on your whole estate.

Source: HMRC, Inheritance Tax rates and allowances (nil-rate band £325,000, residence nil-rate band up to £175,000, rate 40% above the threshold), gov.uk, published under the Open Government Licence v3.0.

The second bill: income tax if you die at 75 or over

Inheritance tax is not always the end of it. Pension death benefits carry their own income tax rules, and they turn on your age at death. If you die before 75, benefits paid or designated within two years are normally free of income tax. If you die at 75 or over, whoever inherits the pot pays income tax at their own marginal rate on what they draw from it.

From 2027, those two taxes can land on the same money. An unmarried partner inheriting a pot from someone who died at 75 or over could face inheritance tax on the value coming into the estate and then income tax as they draw the money down. A married survivor, by contrast, escapes the inheritance tax through the spouse exemption and is left with only the income tax that anyone would pay. The gap between the two households widens further at older ages. The parallel version of this double charge, seen from an adult child's side rather than a partner's, is set out in the tax an adult child can owe on an inherited pension.

What you can actually do about it

There is no single right answer, and this is not the place for one, because the decision belongs to you and your circumstances. But the realistic options are worth naming plainly.

Marriage or a civil partnership is the most direct. It gives access to the spouse exemption and to the transferable nil-rate band, and it changes the arithmetic above from a £120,000 bill to nothing. It also carries a raft of other legal consequences, from wills to next-of-kin rights, so it deserves proper thought rather than a decision made in a fortnight of worry.

Where marriage is not wanted or not right, the question becomes how the surviving partner would meet a tax bill and replace the income without being forced to sell the home. That is the classic role of life insurance written into an appropriate trust, so the payout goes to the partner promptly and outside the estate rather than adding to the very problem it is meant to solve. If that is the route you want to explore, you can get life insurance quotes and have an FCA-authorised broker structure it against your actual figures. Whichever way you go, review every pension nomination form now, because who your pot is directed to affects both the inheritance tax and the income tax your partner faces, a point we develop in a guide to why your pension gives two different answers when you are not married.

Scotland and Northern Ireland

Inheritance tax is a UK-wide tax, so the spouse exemption, the £325,000 nil-rate band, the 40% rate and the 2027 pension change apply the same way in Scotland and Northern Ireland as in England and Wales. An unmarried partner is outside the spouse exemption wherever they live in the UK.

What differs north of the border and across the Irish Sea is the surrounding succession law, which can matter a great deal for a cohabiting partner. Scotland gives a surviving cohabitant a limited right to apply to the court for a share of the estate within a strict time limit, and Northern Ireland has its own intestacy and family provision rules. Neither creates the inheritance tax spouse exemption; both affect what a partner can claim from the estate around it. The wider 2027 picture, including the benefits that escape the change, is covered in a guide to how death in service escapes the 2027 pension inheritance tax change, and the whole topic sits within our guide to pensions, nominations and death benefits.

Frequently asked questions

Why does an unmarried partner pay inheritance tax when a spouse does not?

Inheritance tax has always exempted transfers between spouses and civil partners, and that exemption is preserved when unused pension funds are brought into the estate from 6 April 2027. Cohabitation, however long and however financially entangled, does not create the same relief in law, so a partner's share of the pension is chargeable while a spouse's is not.

How much inheritance tax could my partner pay on my pension?

Inheritance tax is charged at 40% on the value of an estate above the available nil-rate band, which is £325,000, and thresholds and reliefs apply to the estate as a whole rather than to the pension alone. On a pension share that falls wholly above the band, that is 40% of the share. Your partner may also pay income tax if you die at 75 or over.

Would getting married solve it?

Marriage or a civil partnership gives access to the spouse exemption and the ability to transfer an unused nil-rate band, which changes the arithmetic substantially and removes the inheritance tax charge on what passes to a spouse. It is not the only response available, and it carries other legal consequences, so it deserves proper thought rather than a rushed decision.