Published on: 7th August 2023

Inheritance Tax for Married Couples and Civil Partners vs Partners

In England & Wales, everyone has allowances against inheritance tax. The allowances often benefit spouses and civil partners compared to partners, as a transfer of assets to a spouse/civil partner is exempt from inheritance tax at the time of the transfer. For instance, no inheritance tax would be paid if Husband ‘H’ leaves his complete estate to Wife ‘W’ after death. This is known as “spouse exemption.”

Furthermore, if the amount of the Nil Rate Band (the threshold up to which no inheritance tax is due) was not utilised by the first spouse or civil partner to pass away, this can be transferred to the surviving spouse or civil partner. This means that the survivor will have an increased or additional inheritance tax allowance.

The Nil Rate Band allowance is currently set at £325,000 per person, with anything over this amount potentially being taxable at 40%. There is also another allowance, known as the Main Residence Nil Rate Band allowance of £175,000. This allowance is available if you are leaving your property to your child/children and if you own and live (or have lived) in the property. Therefore, with both of these allowances, it is possible to have an inheritance free tax allowance of £500,000. For married couples this can increase to £1 million.

However, if your partner leaves you their estate upon death and you are not married or in a civil partnership, inheritance tax may well be chargeable. For unmarried partners, you cannot transfer the Main Residence Nil Rate Band or the Nil Rate Band allowances. Subsequently, they will not benefit from spouse exemption and if the combined value of assets transferred by unmarried partners exceeds the available Nil Rate Band allowance, inheritance tax will apply.

Before you rush to the altar, don’t worry! By including  a special trust in the Will of unmarried partners, this could save a considerable amount in inheritance tax ~ potentially up to £130,000. So, whilst partners do not benefit from the transferable inheritance tax allowances, we can guide you on how to distribute your assets, in your Will, using the most tax effective method.

If you would like to discuss your current circumstances regarding Inheritance Tax and possible ways of mitigating liabilities, please consider booking a no-obligation appointment with one of our Consultants by calling 01732 868190 or by using our online form by clicking here.

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If you wish to give instructions or require general information about our Wills, Lasting Powers of Attorney, or Trusts then we will carry out a telephone or Zoom appointment.

However, if you wish to give instructions to one of our Consultants and you feel that you can only do this at a Face to Face meeting then we are offering, at our Consultant’s discretion, a limited number of Face to Face appointments in most of the areas we normally cover. To see the areas we normally cover please click here.

To arrange an appointment please telephone 01732 868190 or click here.

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