Inheritance Tax Benefits of Marriage and Civil Partnerships for Landlords

When Martin Lewis recently described marriage as the “ultimate inheritance tax hack,” he highlighted a technical benefit that equally applies to civil partnerships. For landlords, especially those with substantial property portfolios, this distinction can mean the difference between preserving wealth within the family or losing significant sums to HMRC.

Understanding the Spousal and Civil Partner Exemption

Current UK inheritance tax rules provide each individual with a £325,000 nil rate band, plus an additional residence nil rate band of up to £175,000 when a qualifying main residence passes to direct descendants. Importantly, any unused allowances can transfer to a surviving spouse or civil partner. Transfers between spouses or civil partners are exempt from inheritance tax both during lifetime and on death.

In practical terms, a married couple or civil partners can often pass on up to £1 million free of inheritance tax, assuming their estate includes a qualifying residence and appropriate planning is in place. Conversely, unmarried couples, regardless of how long they have cohabited, cannot transfer unused allowances and receive no automatic exemption. Only legal status as a spouse or civil partner counts.

For landlords with appreciating property assets, this legal distinction materially affects long-term financial outcomes.

Why Legal Status Matters in Later Life and Second Relationships

Many landlords rebuild their personal lives after divorce or bereavement, sometimes living with new partners for years and sharing financial responsibilities. However, unless they marry or register a civil partnership, inheritance tax law treats them as unrelated individuals.

On the first death, assets passing to an unmarried partner may face inheritance tax at 40% above the available thresholds, with no deferral or doubling of allowances. For example, in a £1.5 million property-heavy estate, this can result in a substantial immediate tax liability. Such capital could otherwise stabilise borrowing, support the surviving partner, or preserve assets for children.

Therefore, entering into marriage or a civil partnership is not solely a personal decision but also a strategic liability management choice for landlords.

The Commercial Perspective Landlords Should Consider

Property investors routinely assess structure, risk, and efficiency. Viewed commercially, marriage or civil partnership offers three key advantages:

1. Unlimited transfers between spouses or civil partners without inheritance tax.
2. Deferral of inheritance tax entirely on the first death.
3. Full transfer of unused nil rate bands, effectively doubling the available thresholds for the surviving partner’s estate.

This framework creates valuable time and flexibility to refinance, reorganise ownership, and plan succession deliberately rather than reactively. For landlords focused on business continuity and legacy, such flexibility can be more valuable than any single tax saving.

Options for Couples Who Choose Not to Formalise Their Relationship

There are legitimate personal reasons why some couples may choose not to marry or register a civil partnership. However, awareness is crucial. While wills, trusts, lifetime gifting, and life assurance can mitigate inheritance tax exposure, none replicate the simplicity and certainty of the spousal or civil partner exemption. These alternatives often introduce additional cost, complexity, and ongoing administration.

Choosing not to formalise a relationship should be a conscious, informed decision rather than a structural oversight.

Conclusion: Marriage and Civil Partnership as Powerful Planning Tools

Inheritance tax planning is rarely about the tax itself; it is about providing security for the person left behind, protecting children, and preserving the value of a lifetime’s work. For landlords, marriage or civil partnership remains one of the most powerful structural tools under UK inheritance tax law, yet it is surprisingly one of the most frequently overlooked.

The post Marriage, civil partnerships and why landlords should not ignore the obvious appeared first on Property118.

Suggested internal link anchors

• inheritance tax planning
• spousal exemption
• civil partnerships
• nil rate band
• residence nil rate band
• property portfolios
• estate planning
• tax liability
• business continuity
• succession planning
• wills and trusts
• lifetime gifting

TLA update

TLA is launching a new Trusted Partners Hub in Q1 2026, featuring verified and approved service providers selected to support landlords, tenants, and property management businesses. We are inviting legal, trades, insurance, financial, mortgage, tenant screening, and other service providers to register their interest here: https://landlordassociation.org.uk/become-a-tla-service-partner/