How being married can save you paying Inheritance Tax

Being married (or in a civil partnership) can save you paying Inheritance Tax because spouses can pass assets to each other tax-free and combine tax-free allowances.

Thinking about Inheritance Tax is not easy, especially in regards to a romantic partner. It usually comes up at an emotionally difficult time, sometimes when the person you love most is no longer around.

But understanding how Inheritance Tax works – and how marriage or a civil partnership can affect how much you pay – can make a big difference.

In the UK, being married or in a civil partnership is not just a romantic choice. It comes with a lot of financial implications, especially when it comes to Inheritance Tax (IHT). For many families, knowing the rules around marriage and Inheritance Tax can be the difference between passing assets on smoothly or facing a big tax bill at the worst possible time.

At Provira, we see situations like this all the time.

Families are often surprised by how quickly an Inheritance Tax bill is due, especially when they are already dealing with loss.

That’s where our Estate Advance comes in.

Our specialist Estate Advance gives executors access to up to 50% of the total net value of an estate within days, helping them meet Inheritance Tax deadlines and other estate costs quickly.

We can handle HMRC payments directly, we charge simple interest rather than compound interest, and there are no monthly repayments. The advance is paid back to us in full once the estate has been settled.

If this sounds like it could help you manage an estate more smoothly, you can start an application today or speak to our compassionate team to learn more.

What Is Inheritance Tax?

Inheritance Tax is a tax charged on someone’s estate when they die. An estate is made up of everything they own, including property, savings, investments and personal items.

In most cases, Inheritance Tax is charged at 40% on the value of an estate above the £325,000 nil-rate band. There is also an extra £175,000 residence nil-rate band if a main home is left to children or grandchildren.

This means a person could potentially pass on up to £500,000 tax-free. However, this number can change dramatically depending on whether they were married or in a civil partnership when they passed away.

What are the Inheritance Tax benefits for married couples and civil partners?

One of the biggest financial advantages of marriage or civil partnership is the spousal exemption.

What this means is that anything left to a spouse or civil partner is completely exempt from Inheritance Tax, regardless of value. There is no upper limit.

Even more importantly, any Inheritance Tax allowances that weren’t used by the first spouse to pass away can be transferred to the surviving spouse.

This means that if everything is left to a spouse when a person dies, no Inheritance Tax is paid at all. Additionally, the first spouse’s allowances, namely the £325,000 nil-rate band and £175,000 residence nil-rate band can be passed on.

When the surviving spouse passes away, this means that the estate can potentially pass on up to £1 million tax-free if their estate includes a family home left to direct descendants.

Example: A married couple

To bring this to life, let’s start with an example: Alan and Sarah are married and own a home together worth £600,000. They also have £300,000 in savings and investments.

When John dies, everything passes to Sarah. No Inheritance Tax is due.

When Sarah later dies, her estate is worth £900,000. Because she inherited John’s unused allowances, the estate gets £650,000 tax free from their combined nil-rate bands and an extra £350,000 tax free combined from their residence nil-rate bands.

That gives Sarah a tax-free allowance of £1 million, meaning that no Inheritance Tax is due on their £900,000 estate.

See Martin Lewis’ explanation here:

How does Inheritance Tax work for unmarried couples?

For unmarried couples, the situation is very different. This is because there is no spousal exemption or an ability to transfer unused Inheritance Tax allowances, even if the couple have lived together for years and built a family.

This means that when the first person in the couple passes away, their partner may have to pay Inheritance Tax at 40% above the £325,000 threshold.

Even with a valid will in place, paying the tax can’t be avoided.

Example: An unmarried couple

Now, let’s imagine a situation that involves an unmarried couple.

Jan and Jason have lived together for 25 years. Their life together has been identical to John and Sarah’s, except they aren’t married or in a civil partnership.

When Jason dies and leaves everything to Jan, the spousal exemption does not apply and Jan can’t inherit Jason’s unused allowances.

If the estate is valued above £325,000, Jan would have to pay Inheritance Tax on 40% above the tax-free threshold within 6 months.

As you can imagine, this can add a lot of financial stress at an already difficult time.

How Provira’s Estate Advance can help

Provira’s Estate Advance is designed to support executors when an estate has costs to cover but the assets are not accessible yet.

With Provira’s Estate Advance, executors can access up to 50% of the total net value of the estate, often within just a few days, helping them move forward without unnecessary financial pressure.

To find out more, get in touch with the team today.

Is marriage a smart financial strategy?

Marriage can be a smart financial strategy in some cases. For many couples it can offer a lot of financial protection, especially when it comes to estate planning.

However, marriage is also a legal contract, so getting married purely for the Inheritance Tax benefit is not a good idea. If things go wrong, divorce can be complicated and expensive, not to mention hugely emotionally draining.

For some couples, marrying purely for tax reasons may not make sense, and that’s okay.

It is always worth taking professional advice and making sure your estate planning is done with your choice in mind.

Estate planning is incredibly important

An Inheritance Tax bill can come at the worst possible time. Emotions are running high, you might be struggling with grief and also feel anxious about paying the bill.

While only a small percentage of estates pay Inheritance Tax in the UK, it’s important to plan ahead to make sure that your partner, whether married or not, has options if they are faced with an Inheritance Tax bill.

How Provira can support couples

Provira is the UK’s most trusted Inheritance and Estate Advance provider and we are here to help couples navigate this difficult time, whether they are married or not.

If you are dealing with the death of an unmarried partner and facing an Inheritance Tax bill, Provira’s Estate Advance could be the solution you’re looking for.

You can:

• Start an application online
• Speak directly to a member of our caring and compassionate team
• Access funds within weeks, with no monthly repayments

That way,  you can navigate this journey with care and confidence, with us with you every step of the way.

Looking for support? Get in touch with the team today.