Financial disadvantages of not being married

Many couples build deep, lasting relationships without ever walking down the aisle. You might share a home, raise children, and navigate life’s ups and downs together – all without formalising your commitment on paper. But when it comes to finances and legal rights, love and longevity alone aren’t always enough.

Living together without legal recognition may feel just as serious, but it can leave you unexpectedly vulnerable when it comes to money, tax, pensions, and property rights. The law doesn’t automatically protect long-term partners who haven’t formalised their relationship.

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 is rising – but the law hasn’t caught up

According to the latest data from the Office for National Statistics, over 3.6 million couples in the UK now cohabit without being married or in a civil partnership – a figure that has steadily risen over the last decade.

However, despite the growing popularity of cohabitation, legal and financial systems have been slow to adapt. There's no such thing as a "common law marriage" in the UK, no matter how long you live together. This means unmarried couples often have fewer rights and protections than they realise, particularly when it comes to inheritance, pensions, and property.

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. If you’re not married or in a civil partnership and your partner dies intestate (without a will), you are not automatically entitled to inherit anything, not even the home you may have lived in together for years.

Unless your name is on the title deeds, you could be forced to move out or face costly legal battles to claim a share. The deceased's share of the property will fall into their estate for Inheritance Tax (IHT) purposes, regardless of ownership. However, the ownership post death will depend on whether it was held as ‘joint tenants’ or ‘tenants in common’. 

The solution is that every unmarried couple should urgently put a properly constructed will in place, clearly outlining what happens to property, assets, and possessions after death. 

Inheritance Tax – married couples have a huge advantage

When a spouse or civil partner dies, any assets passed between them are exempt from inheritance tax, regardless of the size of the estate. Assuming they are both long term UK resident.

By contrast, if you’re unmarried and inherit from your partner, anything over the £325,000 inheritance tax threshold could be taxed at 40%. In many parts of the UK, especially London and the South East, this threshold can easily be breached – meaning a grieving partner could be hit with a devastating tax bill.

Even more crucially, married couples can transfer any unused inheritance tax allowance to each other. This means that the surviving spouse could ultimately pass on up to £1 million of their estate tax-free, provided they leave the family home to direct descendants –  whilst non-married couples may be able to pass £1m down to the next generation, they are not able to pass the Residence Nil Rate Band to each other, and therefore could have an unexpected tax bill if property passes 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’re eligible for extra payments based on your spouse’s National Insurance record. Even under the new State Pension system, in some cases, widowed spouses can inherit protected payments.

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

Worth noting that some workplace pensions will only pay a survivor’s pension to a legal spouse or civil partner – another potential financial blow for long-term cohabitees.

Married couples can inherit ISA allowances

ISAs (Individual Savings Accounts) offer tax-free savings and investment growth – but many people don’t realise that these benefits can extend beyond death for married couples or 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 – known as the Additional Permitted Subscription (APS). This means a partner could inherit an extra allowance, in addition to their own annual ISA limit.

For unmarried couples, there is no such benefit. The ISA funds themselves may be inherited if left in a will, but the valuable tax-free wrapper is lost – and any interest 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 can save money that unmarried partners cannot.

Each individual currently has a CGT-free allowance of £3,000 per year. If you're married or in a civil partnership, you can transfer assets between you without triggering any CGT. This allows couples to share gains and utilise both tax-free allowances – or allocate 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 enjoy this exemption. Transferring assets between partners could be treated as a taxable disposal, potentially triggering CGT. Over time, this can result in significantly 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: 

• No automatic right to each other’s pensions unless explicitly nominated (If pension is under a discretionary arrangement, the trustees make the decision). The spouse does not have an automatic right in all circumstances.
• No right to spousal maintenance or pension sharing if the relationship ends (unless going through costly legal claims).
• Limited legal protection if one partner sacrifices a career to raise children or support the other’s ambitions.

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

Are there any financial benefits to staying unmarried?

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

• Means-tested benefits: Unmarried couples are assessed together, but marriage may formalise income sharing that affects benefit eligibility.
• Flexibility: Unmarried couples aren't legally tied for financial purposes, making separating finances easier if the relationship ends.

However, these potential "benefits" are often outweighed by the significant risks and losses that come with lacking legal status.

Personal responsibility: protect yourself through planning

If marriage or civil partnership isn’t on the cards, the key is taking proactive steps to protect yourselves financially:

• Make valid wills to ensure your assets go to the right person.
• Consider life insurance to provide financial security if one partner dies.
• Review pension nominations and update them regularly.
• Agree property ownership arrangements and record them properly.
• Think about cohabitation agreements to formalise financial responsibilities and expectations.

You can’t rely on sentiment alone when it comes to finances. Planning today could save heartache, hardship, and huge legal bills in the future.

Think carefully about your future

Staying unmarried can work perfectly well for many couples – emotionally, practically, and personally. But it’s crucial to understand that love alone doesn’t grant financial security.

Marriage or civil partnership remains the simplest and most comprehensive way to unlock important financial rights and protections. If that’s not the right path for you, taking steps to protect yourselves through proper estate planning is not just sensible – it’s 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.