Financial disadvantages of not being married

Millions of unmarried couples could soon gain stronger legal protections under government proposals designed to modernise the law for cohabiting partners. The consultation, which closed in August 2026, looked at whether couples who live together for at least three years, or who have a child together, should have clearer rights if they separate or if one partner dies.

The proposals have attracted attention because they touch on a long standing misunderstanding. Many couples believe that living together for years gives them similar rights to marriage or civil partnership. In most financial planning situations, it does not. 

Living together without legal recognition may feel just as serious as being married, but it can leave you unexpectedly vulnerable when it comes to money, tax, pensions and property rights. The law does not currently automatically protect long term partners in the same way as spouses or civil partners.

This is why the current debate is important, but it should not be misunderstood. Even if cohabiting couples gain stronger rights on separation or death, that does not automatically mean they will gain the same tax advantages as married couples or civil partners. Tax rules around inheritance tax, capital gains tax and ISA allowances are written separately, and any change to those rules would likely need specific tax legislation.

So, what are the key financial risks of staying unmarried? And why is careful planning essential to avoid costly surprises down the line? 

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Cohabitation reform in the news, but the tax position has not changed

The government has consulted on creating a new legal framework for eligible cohabiting couples. The proposals focus on giving qualifying partners more protection when a relationship ends and improving inheritance rights where one partner dies without a will.

This could be a significant shift for many households. According to the Office for National Statistics, there were 3.5 million cohabiting couple families in the UK in 2025, making up 17.6% of all families. Cohabiting couples are now a major part of modern family life, yet the financial planning rules still largely treat marriage and civil partnership as the dividing line.

For now, there is no such thing as a common law marriage in the UK. No matter how long you live together, cohabitation does not give you the same automatic tax treatment as a spouse or civil partner.

The consultation may lead to stronger rights for some cohabiting partners, but it does not currently remove the need for wills, clear property ownership, pension nominations, life cover and estate planning. Nor does it currently give cohabiting couples the same inheritance tax advantages as married couples or civil partners. 

Could cohabiting couples gain the same inheritance tax rights as married couples? 

At the moment, the answer is no. The consultation is about stronger rights when relationships end or when one partner dies. It does not, by itself, change the inheritance tax rules that apply to spouses and civil partners.

This is an important distinction because a cohabiting partner may eventually have a stronger claim against an estate, or improved rights if their partner dies without a will, depending on what the government decides after the consultation. But that does not necessarily mean assets passing to them would be free from inheritance tax.

For cohabiting couples to receive the same inheritance tax treatment as spouses or civil partners, the tax legislation would need to change. That could require separate measures in a future Finance Act or other specific tax legislation. Until that happens, financial planning must be based on the rules as they stand today.

This is where the story becomes especially relevant for couples with property, investments, pensions or business assets. If only a small proportion of long term cohabiting couples chose to marry or enter a civil partnership because of inheritance tax planning, that could still represent thousands of households taking action because the tax consequences are so different. 

The risk of losing your home after a partner’s death

One of the most distressing financial risks for unmarried couples is what happens if one partner dies without a will. Currently, if you are not married or in a civil partnership and your partner dies intestate, you are not automatically entitled to inherit everything, even if you lived together for years. 

Unless your name is on the title deeds, you could be forced to move out or face costly legal action to claim a share. The deceased partner’s share of the property may also fall into their estate for inheritance tax purposes. What happens to ownership after death will depend on whether the property was held as joint tenants or tenants in common.

Every unmarried couple should have properly drafted wills in place. These should clearly set out what happens to property, assets and possessions after death. A will cannot remove every tax issue, but it can reduce uncertainty and help protect the surviving partner. 

Inheritance Tax: married couples still have a huge advantage

When a spouse or civil partner dies, assets can usually pass between them free from inheritance tax, assuming the relevant UK tax residence rules are met.

By contrast, if you are unmarried and inherit from your partner, anything above the available inheritance tax threshold could be taxed at 40%. In many parts of the UK, especially London and the South East, property values alone can be enough to create a potential inheritance tax issue.

Even more importantly, married couples and civil partners can transfer unused inheritance tax allowances to each other. This means the surviving spouse or civil partner may ultimately be able to pass on up to £1 million free from inheritance tax, provided the full nil rate band and residence nil rate band are available and the family home passes to direct descendants.

Unmarried couples may still be able to pass wealth to the next generation, but they cannot transfer unused inheritance tax allowances between each other in the same way. This can create an unexpected tax bill if property or other assets pass to the surviving partner.

Married couples can maximise state pension benefits

Marriage can also provide additional financial security later in life through pensions.

If you or your partner reached State Pension age before 6 April 2016 under the old State Pension rules, being married could mean you are eligible for extra payments based on your spouse’s National Insurance record. Even under the new State Pension system, some widowed spouses can inherit protected payments.

Unmarried partners generally have no such entitlements, regardless of how long they have lived together. 

Married couples can inherit ISA allowances

ISAs (Individual Savings Accounts) offer tax free savings and investment growth, but many people do not realise that these benefits can extend beyond death for spouses and civil partners.

When someone with ISAs dies, their surviving spouse or civil partner is entitled to an additional ISA allowance equivalent to the value of the deceased’s ISAs. This is known as the Additional Permitted Subscription. It allows the surviving spouse or civil partner to retain the value of their spouse’s ISA, in addition to their own annual ISA allowance.

For unmarried couples, there is no such benefit. The ISA funds themselves may be inherited if they are left in a will, but they will no longer be tax free. Any future interest, dividends or gains could become taxable in the recipient’s hands. 

Capital Gains Tax: more efficient tax planning for married couples

Capital Gains Tax (CGT) is another area where married couples and civil partners can have more flexibility than unmarried partners. 

Each individual currently has a capital gains tax annual exempt amount of £3,000 per year. 

If you are married or in a civil partnership, you can usually transfer assets between you without triggering any CGT. This can allow couples to use both annual exemptions, or to hold assets in the name of the partner who is likely to pay tax at a lower rate i.e. allowing couples to use both tax-free allowances and allocating gains to the lower-income spouse to reduce the CGT rate from 24% (higher-rate taxpayer) to 18% (basic-rate taxpayer).

Unmarried couples do not have this exemption. Transferring assets between partners could be treated as a taxable disposal, which may create a capital gains tax charge. Over time, this can result in higher tax bills when selling property, shares or other investments. 

Other financial disadvantages of not being married

The financial downsides of remaining unmarried can add up: 

• There may be no automatic right to a partner’s pension unless the right nomination is in place and the pension scheme rules allow it.
• There is currently no automatic right to spousal maintenance or pension sharing if the relationship ends. Some legal claims may be possible, but they can be costly and uncertain.
• There may be limited protection if one partner gives up work, reduces their hours or uses their income to support the household while assets are built up in the other partner’s name. 

While marriage isn’t a financial silver bullet, it does provide a framework of rights and protections that cohabitation does not currently match.

Are there any financial benefits to staying unmarried?

To be balanced, there are a few areas where staying unmarried might appear advantageous.

Unmarried couples may find it simpler to keep their finances separate if the relationship ends, although this can also leave one partner exposed if they have contributed informally to a home, business or family life.

For some couples, marriage may affect wider financial arrangements or family expectations. However, from a tax and estate planning perspective, the advantages of marriage or civil partnership are often significant.

Means tested benefits can be complex. Couples who live together are often assessed as a couple whether they are married or not, so staying unmarried should not be assumed to create an advantage.

Personal responsibility: protect yourself through planning

If marriage or civil partnership is not on the cards, the key is to take proactive steps to protect yourselves financially.

Make sure you both have valid wills. Review how your property is owned. Check pension nominations. Consider life insurance. Keep records of who contributed what to property, savings or business assets. Think about whether a cohabitation agreement could help clarify financial responsibilities.

These steps matter even more while reform is still uncertain. The consultation may lead to new rights for some cohabiting partners, but it should not be treated as a substitute for proper planning.

You cannot rely on sentiment alone when it comes to finances. Planning today could save heartache, hardship and significant legal costs in the future.

Think carefully about your future

Marriage or civil partnership remains the simplest and most comprehensive way to unlock important financial rights and protections. If that is not the right path for you or your loved ones, taking steps to protect yourselves through proper estate planning is essential.

At The Private Office, we work with individuals, couples and families who have £100,000 or more in investible assets, helping them build robust financial plans that fit their lives and futures. If you’d like to understand how marriage, cohabitation, or estate planning could affect your long-term wealth, get in touch with one of our independent financial advisers today.

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The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing.

Levels, bases and reliefs from taxation may be subject to change.

This article is intended for general information only, it does not constitute financial or legal advice and should not be used to inform financial decisions.

The Financial Conduct Authority (FCA) does not regulate cash flow planning, estate planning, wills, tax or trust advice.