The inheritance tax benefits of getting married

From an estate planning perspective, there are significant inheritance tax (IHT) advantages available to married couples and civil partners in the UK.

1/ The Spouse and Civil Partner Exemption
One of the most valuable IHT reliefs in the UK is the spouse exemption.
If you are legally married or in a registered civil partnership, you can leave any amount to your spouse or civil partner on death, completely free of IHT. This is irrespective of the size of your estate.

In contrast, and contrary to popular belief, unmarried couples – even those who have lived together for decades – do not benefit from this exemption. Gifts between them may be subject to IHT, depending on the size and nature of those gifts and any other IHT reliefs that may be applicable.

2/ Transfer of Unused Nil-Rate Band
Each individual has a tax-free allowance known as the nil-rate band, which is currently set at £325,000.

If you are married or in a civil partnership and you leave everything to your spouse or civil partner on first death, your own nil-rate band is not used owing to the spouse exemption. The unused percentage of the first to die’s nil-rate band can then be transferred to your surviving spouse or civil partner.

This means that upon second death, the surviving spouse’s estate may benefit from:
• Their own £325,000 allowance
• Plus up to 100% of their late spouse’s unused allowance

The result is that a couple can potentially pass on up to £650,000 free of IHT.

3/ Residence Nil-Rate Band
Since April 2017, there is an additional IHT relief which is potentially available when the main residence is passed to direct descendants such as children or grandchildren. This is known as the Residence Nil-Rate Band (RNRB) and is currently set at £175,000 per person, although this is capped at the value of your property.

As with the ordinary nil-rate band, subject to certain criteria you can also claim any unused transferable RNRB from a deceased spouse or civil partner.

This can potentially increase the combined tax-free thresholds to up to £1 million for some married couples or civil partners with children.

It is important to note that whilst these allowances are available for married couples and civil partners, they are not automatic and in many cases must be claimed. In addition, these allowances can be lost should you die without a Will, or if your Will is not structured in a tax-efficient manner.

Here at Hamers Solicitors, we can provide you with professional, tailored advice on how these rules apply to your circumstances and what arrangements can be put in place to make your estate as tax efficient as possible. Call us on 01482 326666.

*This article is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.