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Kirk Rice Blog

Tax Implications for Unmarried Cohabiting CouplesWritten on March 13, 2024 by Kirk Rice LLP

Tax is no reason to get married or register a civil partnership, but you could get smart.

If you are in a unmarried cohabiting relationship, you may not know everything you ought to know about property, finances, taxes, and the law.

Did you know unmarried cohabiting couples do not have legal rights over assets, savings or property similar to those in civil partnerships or marriage?

Unmarried individuals, especially those without a Will, are far more likely to contribute inheritance tax to the government after death for several reasons. You may be exposed to paying far more tax than you need to.

The value of all assets, including jointly owned homes, is assessed for inheritance tax on death. This tax bill can leave your dependents with a lot less savings or even mean they have to move out of the family home after your death.

Without a Will, you may be surprised that whatever you own is not legally inherited by the person you enjoy your life with. If you don’t have a Will, you are not alone in the UK, but it should be the first step in sorting out your affairs and not only to reduce the loss to tax.

After your death, your effects, savings, and pensions are divided up. First in line are any children; if you do not have any children, your parents, siblings, half-siblings, grandparents or aunts/uncles and then the Crown, leaving your surviving life partner with nothing.

Many people buy a joint life policy as it appears to be the easiest way to provide money for your dependents or pay off a loan or mortgage, but did you know it can lead to increased tax liability on death, too?

In the absence of getting married or having a civil partnership, consider:

  • Make a Will to state who the assets are left to and any rights, e.g. the surviving unmarried partner being able to live in the property)
  • Review which of the two types of joint ownership you have for your home, as one can help reduce the tax on death
  • Review any life and serious illness policies. Joint policies increase the tax bill on death just when the money is needed by your dependant(s).

Solicitors and financial advisers will show you what you need to do to improve your financial well-being and avoid the unwelcome impact of failing to plan for the people you leave behind. Please email info@kirkrice.co.uk to arrange a call with a financial adviser.

Sources:

www.gov.co.uk

www.ons.gov.uk

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Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of relief from taxation are subject to change. The Financial Conduct Authority does not regulate tax planning.

This is published for information purposes only and does not constitute financial or investment advice. Examples are for illustrative purposes only. The guidance and/or information contained within this site is subject to the UK regulatory regime and is, therefore, only relevant to consumers based in the UK. Any comments and data should not be taken to specify any products or actions. They should not be construed as a solicitation, offer, or recommendation to acquire or dispose of any product or investment in any jurisdiction. While all reasonable efforts are made to obtain information from sources that are accurate at the date of production, no representation is made or warranty provided that the information or any opinions contained in this document are accurate, reliable, or complete. The information and any opinions expressed are based on current conditions and certain assumptions and are subject to change without notice. Any user must, in any event, conduct their independent due diligence and investigations, together with their professional advisers, into legal, regulatory, tax, credit and accounting matters before making decisions rather than relying on any of the information given. We will make every effort to correct errors brought to our attention.

Issued by Kirk Rice LLP, authorised and regulated by the Financial Conduct Authority (registered number 531538) and registered in England and Wales (registered number OC354936). Registered office:  The Courtyard, High St Ascot, SL5 7HP

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