When HMRC Makes You Say “I Do”

Comedian and actor Ricky Gervais recently said that he intends to marry his long-term partner, English author and television producer Jane Fallon, to avoid inheritance tax.

Ricky’s comments highlight that there can be significant financial consequences to choosing to cohabit rather than marry, particularly when it comes to inheritance tax. The reaction has been significant, either from people commenting on the lack of romance, or from others who have been in similar situations.

Should I get married?

Having practiced private client law for over a decade, I have certainly suggested that clients consider marriage (or a civil partnership) as a means of inheritance tax mitigation. In some senses, it could be argued that it would be negligent to draft a standard mirror will for an unmarried couple without at least considering this and here’s why:

For argument’s sake, say Ricky and Jane lived in a much more reasonably priced and relatable house, valued at £450,000, which they owned as joint tenants.

They each also had savings of £150,000, so their combined estate was £750,000.

They want to leave everything to each other and then on to their shared children who are adults.

On the face of it, those are very straightforward instructions. However, on the first death there would be no exemptions available and only a single inheritance tax allowance of £325,000 on assets passing to the survivor. This means that the surviving partner would have an inheritance tax liability of £20,000 to pay.

On the survivor’s death, there would once again only be a single person’s allowances available, which when we include the residential nil rate band, allow £500,000 to pass free of inheritance tax.

The inheritance tax liability would therefore be a further £92,000, meaning HMRC will get a total of £112,000 in inheritance tax.

Benefits of being married

Now, if they were married, there would be no inheritance tax payable on the first death, and the surviving spouse would benefit from an inheritance tax allowance of £1,000,000 on the second death. As a result, no inheritance tax would be payable on the second death either.

That’s a difference of £112,000 (less the cost of a wedding).

Marriage is certainly not something to be entered into lightly and should never be a decision made purely for tax reasons. The number of couples choosing to cohabit has been steadily increasing for more than a decade. For some, this may be because marriage no longer holds the same romantic appeal or significance that it does for others. But if you are of a more pragmatic mind, the numbers speak for themselves: marriage may not only be a romantic commitment, but a very practical one too.

How Blanchards Family Law can help

The good news is that you don’t necessarily need to walk down the aisle to put your affairs in order. With the right advice, there are steps unmarried couples can take to protect each other and ensure their wishes are properly reflected in their estate planning.

At Blanchards Family Law, we can help you understand how your relationship status, assets and family circumstances could affect your inheritance tax position and advise you on the options available to you. Whether you are married, in a civil partnership or choose to cohabit, getting the right advice and putting appropriate wills and estate planning in place can make a significant difference.

Because when it comes to inheritance tax, a little pragmatism today could save your family a very significant amount tomorrow.

Call us today on 0333 344 6302 to speak to a member of the team.