What is inheritance tax?

Inheritance tax is a tax on the estate of someone who has died. Their estate includes all their property, possessions, and money. The standard inheritance tax rate is 40%. It’s only charged on the part of your estate that’s above the tax-free threshold. The tax-free threshold is currently £325,000. Different exemptions and allowances can be applied to reduce the inheritance tax payable.

Do unmarried partners have to pay inheritance tax?

Yes. The special rules that apply to married couples or those in a civil partnership do not apply to unmarried couples. There is, unfortunately, a very real risk for cohabiting couples to find themselves double-taxed – with inheritance tax being payable on both the first death and again on the second.

Do unmarried partners pay inheritance tax on a joint tenancy?

Property that is held by two individuals as joint tenants is not exempt from inheritance tax. When one owner dies, their share in the property will pass automatically to the surviving co-owner or joint tenant (regardless of any will or the intestacy rules). However, the deceased joint tenant's share of the jointly owned property still forms part of their estate for inheritance tax purposes. However, unlike married couples who benefit from the special rules to reduce or completely wipe out inheritance tax, unmarried couples don’t have any exemptions. This means inheritance tax needs to be paid if the total estate is worth over £325,000.

What inheritance tax protection do married couples receive that unmarried couples do not?

There are special rules (“exemptions”) for married couples or those in civil partnerships: When you die, assets left to your spouse or civil partner, provided they're living in the UK, are exempt from inheritance tax. On top of this, if your estate is worth less than your threshold, any unused threshold can be added to your spouse’s inheritance tax threshold and can be used to minimise the tax payable when they die. This means a married couple can currently leave assets worth up to £1 million tax-free. These special rules do not apply to unmarried or cohabiting couples.

What happens if my partner dies without a will?

If your partner dies without having made a will then you will receive nothing under the rules of intestacy because they do not include cohabiting partners. However, any assets you and your partner hold as joint tenants (such as a house or a bank account) will pass to you automatically as the surviving owner. However, there could be inheritance tax payable on those assets.

My partner and I own our house as joint tenants? What does this mean?

If you're joint tenants and your partner has left everything to you in their will, and if the value of your partner's assets (including your jointly owned property) exceeds the inheritance tax threshold, you would have to pay inheritance tax. However, on your partner's death, the property would be owned by you completely. Even if your partner didn't leave a will, thanks to the “right of survivorship”, the property would still go entirely to you although the inheritance tax rules would still apply.

My partner and I own our house as tenants in common. What does this mean?

If you're tenants in common (eg; you each own a specified percentage of the property), it's more complex. If your partner has made a will leaving their share of the property to you, any inheritance tax would need to be paid out of the estate first before the assets can be shared out. Inheritance tax may need to be paid but it would depend upon the value of the rest of the estate. If your partner has not made a will leaving their share to you, and you're tenants in common, their share will go to their relations. As an unmarried partner, you'd only be entitled to the share of the property you currently own.

Inheritance tax for unmarried couples

The rules governing inheritance tax are different for married couples and those in a civil partnership than for those who live together as a couple.

Inheritance tax is a tax on the estate of someone who has died. The rules make clear that married, or civil partnered spouses, enjoy far more protection and allowance against inheritance than unmarried couples.

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What do you need to know

Inheritance tax is a tax on the estate of someone who has died. How much you pay depends on the value of the deceased's estate, which is worked out based on their assets (cash in the bank, investments, property or business, vehicles, pay-outs from life insurance policies) minus any debts.

Importantly, there is normally no tax to pay if the value of your estate is below £325,000 (the inheritance tax threshold – sometimes called the “nil rate band”).

If you give your home to your children (including adopted, foster or stepchildren), or grandchildren, your inheritance tax threshold can increase to £500,000.

There are special rules (“exemptions”) for married couples or those in civil partnerships:

When you die, assets left to your spouse or civil partner, provided they're living in the UK, are exempt from inheritance tax.
On top of this, if your estate is worth less than your threshold, any unused threshold can be added to your spouse’s inheritance tax threshold and can be used to minimise the tax payable when they die. This means a married couple can currently leave assets worth up to £1 million tax-free.

These special rules do not apply to unmarried or cohabiting couples.

If you're not married, but own assets jointly with another person, the situation gets complicated, especially when a residential property is involved. Whether or not you have to pay inheritance tax will depend on whether you and your partner own the property as “joint tenants” or “tenants in common”, and whether there's a will.

Frequently Asked Questions

What is inheritance tax?

Inheritance tax is a tax on the estate of someone who has died. Their estate includes all their property, possessions, and money. The standard inheritance tax rate is 40%. It’s only charged on the part of your estate that’s above the tax-free threshold. The tax-free threshold is currently £325,000. Different exemptions and allowances can be applied to reduce the inheritance tax payable.
Do unmarried partners have to pay inheritance tax?

Yes. The special rules that apply to married couples or those in a civil partnership do not apply to unmarried couples. There is, unfortunately, a very real risk for cohabiting couples to find themselves double-taxed – with inheritance tax being payable on both the first death and again on the second.
Do unmarried partners pay inheritance tax on a joint tenancy?

Property that is held by two individuals as joint tenants is not exempt from inheritance tax. When one owner dies, their share in the property will pass automatically to the surviving co-owner or joint tenant (regardless of any will or the intestacy rules).

However, the deceased joint tenant's share of the jointly owned property still forms part of their estate for inheritance tax purposes. However, unlike married couples who benefit from the special rules to reduce or completely wipe out inheritance tax, unmarried couples don’t have any exemptions. This means inheritance tax needs to be paid if the total estate is worth over £325,000.
What inheritance tax protection do married couples receive that unmarried couples do not?
There are special rules (“exemptions”) for married couples or those in civil partnerships:
- When you die, assets left to your spouse or civil partner, provided they're living in the UK, are exempt from inheritance tax.
- On top of this, if your estate is worth less than your threshold, any unused threshold can be added to your spouse’s inheritance tax threshold and can be used to minimise the tax payable when they die. This means a married couple can currently leave assets worth up to £1 million tax-free.
These special rules do not apply to unmarried or cohabiting couples.
What happens if my partner dies without a will?

If your partner dies without having made a will then you will receive nothing under the rules of intestacy because they do not include cohabiting partners. However, any assets you and your partner hold as joint tenants (such as a house or a bank account) will pass to you automatically as the surviving owner. However, there could be inheritance tax payable on those assets.
My partner and I own our house as joint tenants? What does this mean?

If you're joint tenants and your partner has left everything to you in their will, and if the value of your partner's assets (including your jointly owned property) exceeds the inheritance tax threshold, you would have to pay inheritance tax. However, on your partner's death, the property would be owned by you completely.

Even if your partner didn't leave a will, thanks to the “right of survivorship”, the property would still go entirely to you although the inheritance tax rules would still apply.
My partner and I own our house as tenants in common. What does this mean?

If you're tenants in common (eg; you each own a specified percentage of the property), it's more complex. If your partner has made a will leaving their share of the property to you, any inheritance tax would need to be paid out of the estate first before the assets can be shared out. Inheritance tax may need to be paid but it would depend upon the value of the rest of the estate.

If your partner has not made a will leaving their share to you, and you're tenants in common, their share will go to their relations. As an unmarried partner, you'd only be entitled to the share of the property you currently own.

Inheritance tax for unmarried couples

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What do you need to know

Frequently Asked Questions

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Inheritance tax for unmarried couples

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What do you need to know

Further reading for unmarried couples living together

Frequently Asked Questions

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Existing clients

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