TV producer and comedian Ricky Gervais recently made headlines after mentioning in an interview that a reason he would consider marrying his long-term partner is inheritance tax planning.
His comments highlight an outdated but very real issue: for couples with assets over a certain level, who are happily together but not married or in a civil partnership, inheritance tax can become a serious financial concern.
With more couples choosing not to marry, and forthcoming inheritance tax changes expected to affect more estates from April 2027, the rules are worth a closer look. This matters because relationship status can affect both the tax position and the practical route by which assets are passed on death.
What is Inheritance Tax?
Inheritance tax (IHT) is charged on the property, money, and possessions, known as the estate of someone who has died. From April 2027, unused pensions will also be part of the estate for inheritance tax purposes, having previously been exempt.
Every individual has a £325,000 nil-rate band, and a married couple or civil partnership can combine allowances with the residence nil-rate band to shelter up to £1 million from IHT. Unlimited amounts can also pass between spouses tax-free under the spousal exemption, regardless of the size of the estate.
Government projections suggest 213,000 estates are expected to include pension wealth, of which around 10,500 may face an IHT charge that would not have applied under the previous rules, although some leading pension providers expect this to affect many more. While this will not affect everyone, the issue is not limited to very large estates; frozen thresholds and rising asset values may bring more moderate estates into scope.
Death-in-service benefits from registered pension schemes will be excluded, and existing exemptions for pension death benefits passing to a surviving spouse, civil partner (if long-term UK resident) or to a registered charity will be maintained.
Inheritance tax for Couples in Scotland
In Scotland, the same inheritance tax thresholds and exemptions apply. However, Scottish succession law can affect who is entitled to inherit, particularly where a person dies without an up-to-date will.
For couples, the practical risk is that the 40% IHT charge is calculated on the full estate value before any Scottish succession rules are applied. Without careful planning, this can create a larger tax bill than necessary, even where exemptions or allowances may be available.
The role of financial advice for inheritance tax planning
With pensions to be included as an asset within an estate, this change in legislation highlights the importance of getting financial advice for inheritance tax planning.
From a financial advice point of view, there are three main ways to review this: insure it, spend it, or give it away. However, due to various complexities, solutions vary depending on an individual’s or couple’s personal situation.
In addition to pension funds being part of an estate, if you die after age 75, the beneficiary may also pay income tax on pension benefits. There are therefore more considerations than reviewing the 40% inheritance tax charge in isolation.
With changing trends and many couples, whether married or not, opting to keep finances separate, an independent financial review of assets within an estate with a financial adviser will consider everything in greater detail.
Good financial advice will look beyond the numbers and bring together the practical and emotional sides of estate planning. A financial planner can help quantify the potential IHT exposure, test different options and explain how gifts, trusts, pension withdrawals, insurance, and charitable giving may work in combination. This is particularly important where executors may need to report and pay tax within tight timescales, or where pensions, property and family circumstances make the position less straightforward.
Reviewing plans before April 2027 gives families more time to make informed decisions and preserve liquidity and ensure plans are in place to secure and pass wealth on in line with their wishes.
Janice Dallas is a financial planner at AC Wealth
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