To marry or not to marry? That is the tax question!

Recently, we looked at the Marriage Allowance and the Married Couple’s Allowance, and it got us thinking about the c470,000 families who choose to cohabit rather than marry or enter into civil partnerships and so can’t claim these allowances even if they are otherwise eligible. In this article, we outline some of the tax benefits that cohabiting couples miss out on by not marrying. This article will be useful to those who are studying for any of the CII CF1, R01, R03, R06, AF1, or AF5 exams.

This article is correct as at 10 October 2024 and is relevant to examinable tax year 2024/25.

Over the years, the question has often been raised as to whether unmarried couples should have similar tax breaks as married couples, including rights over the other’s property.

The Law Commission in 2007 recommended that couples who live together should have the same rights of inheritance if one of the pair dies without having made a will after 5 years of cohabitation (or just two if they have children living with them), but the government declined to move forward with the recommendations, and it’s also still the case that cohabiting couples do not enjoy the same tax breaks as married couples. So what tax breaks are the unmarried couples missing out on?

• They can’t inherit an unused nil rate band from their partner
• They can’t make IHT-free gifts to each other during lifetime or on death
• They can’t inherit the ISA allowance
• They don’t enjoy a married couple’s allowance (although this only applies to married couples if one was born before 6 April 1935)
• They don’t enjoy the ‘no gain no loss’ CGT rules on transfers
• And as mentioned in our recent article, they can’t share part of their personal allowance (although even this only applies to lower income households and not all married couples)

As for rights of inheritance, unmarried partners (and partners who have not registered a civil partnership) cannot inherit from each other unless there is a valid will. With over half of the British adult population without a will, a significant number of them will be survived by a partner they weren’t married to. So, if the reasons above aren’t good enough to tie the knot, then the only way to ensure that property and treasured possessions (and that includes the dog) end up with the person or persons the deceased would have wanted, is of course to leave a valid will, duly signed and witnessed.

Grab the resources you need!

If you’re studying for your CII R03 exam, and you want to feel confident on exam day, grab our free taster to try out one of Brand Financial Training’s mock exam papers for yourself.  Click the link to download the R03 mock exam taster now!

Alternatively, you can download the taster for AF1, AF5, CF1, or R06 if any of those exams is causing you worry.