Blog
Preserve it and save: how conditional exemption can protect your heritage... and your wallet
Charles Richardson
It is reported that same sex couples are statistically more likely to live together without marrying or entering into a civil partnership than heterosexual couples, and there is a mistaken belief that ‘common law spouses’ or ‘common law marriages’ exist in the UK. There is no such thing as a ‘common law marriage’ and, subject to any future changes to cohabitation laws (laws relating to couples who live together but are not married/in a civil partnership), cohabitants do not have the same legal rights as married couples or civil partners upon divorce or dissolution.
However, legal recognition of relationships has dramatically changed in the UK and across most western countries. With an urge for equality and to recognise same-sex relationships, the government first introduced civil partnerships for same-sex couples in 2005 and then same sex marriage in 2014, following the Marriage (Same Sex Couples) Act 2013 which completed its passage through parliament and received royal assent in July 2013. The UK’s first same-sex weddings took place in March 2024, just over 10 years ago this year.
In December 2019 civil partnerships were opened up to all couples in England and Wales following the legal campaign by Rebecca Steinfeld and Charles Keidan, after which the Supreme Court issued a unanimous decision that differentiating between same-sex and opposite-sex couples was discriminatory.
All couples are now on an equal footing with a choice about how to formalise their relationship. For many, ‘traditional’ marriage is no longer desirable for religious or societal reasons. Some of our clients do not want to re-marry following a difficult divorce for example, but see civil partnership as a suitable alternative to legally formalise their relationship.
There is no need to exchange vows for a civil partnership, or to be in a romantic or sexual relationship, so friends could even become civil partners in order to take advantage of the legal and tax protection on offer.
Civil partners are entitled to the same property and pension rights as married couples, as well as certain inheritance and tax benefits (set out below and in our previous blog) but cohabitants are not. This is something to bear in mind if you are not married or in a civil partnership with your partner.
Intestacy Rules
When an individual dies “intestate” (i.e. without leaving a Will) their surviving spouse or civil partner will inherit under the intestacy rules, which includes all of the deceased’s personal chattels (i.e. their belongings), a Statutory Legacy or ‘fixed sum’ (currently £322,000), and (at least) half of the remaining estate: if there are children, they will inherit the other half of the estate. If there are no children, the surviving spouse/civil partner would inherit the whole estate.
In comparison, a cohabitant will not automatically inherit their partner’s estate under the intestacy rules but may be able to make a claim under the Inheritance (Provision for Family and Dependants) Act 1975 where certain conditions are met.
Inheritance Tax (“IHT”)
There is no IHT due on estates left to a married partner or a civil partner with the same domicile, as the spousal exemption can be claimed. In comparison, if a cohabitant inherits their partner’s estate (i.e. where they are not married or in a civil partnership), 40% IHT is payable on the value of the estate over the available nil rate band (currently a maximum of £325,000).
Capital Gains Tax (“CGT”)
Transfers of assets between spouses or civil partners pass free of CGT as they can claim the spouse exemption provided they are living together, unlike transfers between cohabitants which are subject to CGT.
One disadvantage of marrying or entering into a civil partnership is that couples can only nominate one main residence for principal private residence relief (“PPR”) when selling their main home. Cohabitants do not need to jointly nominate and so could claim PPR on two separate properties.
Income Tax
Spouses and civil partners can transfer 10% of their unused personal allowance using the Married Couples Allowance. This can be useful when one partner is a low earner and has some personal allowance remaining which can be used by a higher tax rate payer. This is not available to couples who are not married or in a civil partnership.
Stamp Duty Land Tax (“SDLT”)
There is 3% SDLT payable on second homes or investment properties. A disadvantage of marriage or civil partnership is that the couple is treated as a single unit, so if one partner already owns property and the other partner purchases a property for the first time, there will still be 3% SDLT payable. Conversely, cohabitants are treated as separate entities for purchasing purposes.
Civil partnerships remain a popular option for those who identify as LGBTQ+, and are now also available for heterosexual couples who do not feel that the religious and societal connotations of marriage work for them. All couples, regardless of whether they identify as LGBTQ+ or otherwise, now have access to the same tax benefits/entitlements that married couples have traditionally enjoyed.
Contact our experienced LGBTQ+ Private Client lawyers
While the relevant law may apply in the same way for LGBTQ+ clients and non-LGBTQ+ clients, the interpretation and application of that law needs to be tailored to each specific client to consider the circumstances. We understand that LGBTQ+ clients may have circumstances which require careful planning and our Private Client lawyers, working within our firm’s LGBTQ+ & Allies network, are well placed to advise on this.
If you require further information or advice from our team of specialist LGBTQ+ Private Client lawyers, please contact a member of our team or call us on +44 (0)20 7814 1200.
Alternatively, you can submit an online enquiry here.
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