Unmarried vs. Married: What Happens to Your House and IHT When You Die?

17 August, 2026 4 minutes reading time

We speak with clients every day who have lived together happily for decades. They share a bank account, own a home together, and naturally assume they have the same legal rights as a married couple. Unfortunately, HM Revenue & Customs (HMRC) sees things very differently.

There is no such thing as a ‘common-law’ spouse in the eyes of HMRC. Whether you have been cohabiting for five or fifty years, living together without being married or in a civil partnership can dramatically affect how much Inheritance Tax (IHT) your family pays. 

Spousal Exemption & Transferable Allowances

When you pass away, everyone receives a standard tax-free threshold called the Nil Rate Band (NRB), currently set at £325,000. Anything you own above this amount is usually taxed at 40%.

However, marriage and civil partnerships unlock two major tax perks that unmarried couples cannot access:

1. The Spousal Exemption: You can pass 100% of your assets to a surviving spouse or civil partner free of Inheritance Tax. It doesn’t matter whether your estate is worth £500,000 or £5,000,000; zero tax is due on the first death. Unmarried couples receive no spousal exemption, so anything over £325,000 passed to a partner triggers a 40% tax bill immediately. 

2. Transferable Nil Rate Band (TNRB): If you leave everything to your spouse on the first death, you don’t use your £325,000 tax-free allowance. That unused allowance automatically transfers to your surviving partner. On the second death, your estate receives a combined threshold of £650,000 before any tax is payable. Unmarried partners cannot transfer unused allowances. 

Key Takeaway

Marriage or civil partnership instantly doubles a couple’s standard tax-free allowance, from £325,000 to £650,000. 

Residence Nil Rate Band (RNRB)

In 2017, the UK government introduced an additional tax relief called the Residence Nil Rate Band (RNRB). This gives each individual an extra £175,000 tax-free allowance if they leave their family home to the next generation.

When you combine the standard £325,000 allowance with the £175,000 property allowance, you get £500,000 per person. For a married couple or civil partners who combine their allowances, the total reaches the headline £1,000,000 tax-free threshold you often hear about in the news.

However, the RNRB is subject to a strict condition that the house must be left to direct descendants. 

Who Counts as a Direct Descendant?

HMRC defines direct descendants strictly. Understanding who qualifies (and who doesn’t) is critical:

The Niece & Nephew Trap

What happens if you don’t have children or stepchildren? Many couples plan to leave their home to nieces, nephews, siblings, or close friends. While this is a wonderful gesture, it carries a heavy tax penalty.

Because nieces and nephews are not direct descendants under tax law, you cannot claim the £175,000 Residence Nil Rate Band. For a couple, that means missing out on £350,000 in combined property allowances.

Losing £350,000 in property allowances means that portion of your estate is taxed at the full 40% rate. That results in an extra £140,000 Inheritance Tax bill for your nieces or nephews to pay before they inherit your home. 

The Stepchild Advantage

Here is where legal status makes an unexpected difference. Marriage and civil partnerships create legal stepchildren. If Partner A has children from a previous relationship and marries Partner B, those children become Partner B’s legal stepchildren.

Partner B can now leave their share of the family home to those stepchildren and claim their full £175,000 property allowance. If the couple had remained unmarried, Partner B would not be able to use the allowance for those same children. 

How the Allowances Compare

To see how this works in practice, here is how tax-free thresholds stack up depending on your marital status and who inherits your home:

Our Advice

Tax rules aren’t meant to be harsh, but they are strict. To ensure your hard-earned assets go to your loved ones rather than HMRC, a little straightforward planning can make a big difference.

1. Evaluate your marital status: For those with significant assets, getting legally married or entering a civil partnership remains one of the simplest and most effective tax-saving strategies in the UK. 

2. Verify who inherits your home: If you have no children or stepchildren, consider including the £175,000/£350,000 allowance early in your estate planning.

3. Review your Will: Ensure your Will specifies that qualifying property passes directly to your descendants, avoiding trusts that could prevent you from claiming the RNRB.

If you’re uncertain how these rules apply to your property or family situation, don’t hesitate to contact us. We’re always here to help you navigate the legal language and develop a straightforward plan tailored to you.

Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.

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