Last updated: 14 October 2026
Does cohabiting affect inheritance tax compared with marriage?
Yes, a great deal. Married couples and civil partners can leave everything to each other free of inheritance tax (IHT), and the survivor inherits any unused nil-rate bands. Cohabiting couples get neither benefit. If you live together but aren’t married, anything you leave to your partner above your own £325,000 nil-rate band (plus up to £175,000 residence nil-rate band if your home goes to your children) is taxed at 40%. Your partner also has no automatic right to inherit if you die without a will.
Married vs cohabiting: the key differences
| Rule | Married or civil partners | Cohabiting |
| Gifts between partners | Exempt, with no limit | Count as gifts and can be taxed |
| Leaving the estate to your partner | Exempt | Taxable above your nil-rate bands |
| Unused nil-rate band | Transfers to the survivor | Lost |
| Residence nil-rate band | Transferable | Not transferable, and not available on a home left to a partner |
| Inheriting without a will | The spouse inherits first | The partner inherits nothing |
| CGT on transfers between partners | No gain, no loss | Taxable at market value |
Example
Sam and Alex have lived together for 20 years. Sam owns a £500,000 house and £200,000 of savings, and leaves everything to Alex. Sam’s estate is £700,000. After the £325,000 nil-rate band, £375,000 is taxable, so IHT is £150,000. The residence nil-rate band doesn’t apply because Alex isn’t a direct descendant. If they had been married, there would be no IHT on Sam’s death, and Alex’s estate could later use up to £1 million of combined allowances.
Ways to protect a cohabiting partner
- Marry or form a civil partnership. This is the single biggest IHT saving available
- Make a will. Without one, your partner may have to go to court under the Inheritance (Provision for Family and Dependants) Act 1975
- Own your home as joint tenants, so it passes automatically to the survivor. It is still taxable on your share
- Life insurance written in trust to pay any IHT bill
- Pension nominations. Name your partner. From 6 April 2027, unused pensions will count towards the estate for IHT
- Lifetime gifts using the £3,000 annual exemption and gifts out of surplus income
Children and the residence nil-rate band
If you leave your home or a share of it to your children, including stepchildren, the residence nil-rate band can still apply. It tapers away on estates over £2 million.
Does it matter how long you’ve lived together?
No. For IHT, the law treats cohabiting partners as unrelated people, however long the relationship. There is no “common law marriage” in England and Wales.
Frequently asked questions
Can my partner use my unused nil-rate band?
No. Only spouses and civil partners can transfer unused nil-rate bands.
Is there IHT if we own our home jointly?
Your share is in your estate. It passes to your partner automatically if you are joint tenants, but it is still taxable.
What if we marry late in life?
The exemption applies from the date of the marriage, whatever your ages.
Does cohabiting affect capital gains tax?
Yes. Transfers between cohabitees are not tax-free.
Related: gifting money to reduce inheritance tax and reducing an estate below £2 million.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with inheritance tax planning for couples. See our inheritance tax planning service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
