Financial expert Martin Lewis has issued a critical warning directed at couples who cohabit without marriage regarding their exposure to inheritance tax. He explains that married couples and those in civil partnerships can transfer their estates tax-free upon death, avoiding inheritance tax liabilities, which can significantly influence financial planning. In contrast, cohabiting couples do not benefit from this exemption, despite possibly spending many years together or even sharing assets.

The warning highlights that the standard inheritance tax threshold stands at £325,000, with an additional allowance of £175,000 available for those passing their primary residence to children or grandchildren. Lewis elaborates on the fact that should a cohabiting partner pass away and their estate exceeds this threshold, the surviving partner may end up paying a hefty 40% tax on the estate value above the stipulated limit. This situation could potentially lead to considerable financial loss for the surviving partner, making it crucial for couples to consider their marital status seriously, especially regarding long-term estate planning.

Lewis's remarks serve not only as a financial advisory but also as a reminder of the importance of legal recognition through marriage or civil partnerships for financial and tax benefits. As many couples may not be aware of these implications, this information could lead to significant financial decisions regarding their future, particularly in adapting their relationship status to secure their financial well-being and protect their assets against high tax liabilities.