A widespread and costly misconception is leaving thousands of middle-income families across the UK exposed to significant Inheritance Tax (IHT) bills, a leading legal expert has warned.
Jim Emsley of ELM Legal Services told GB News that many people mistakenly believe the law will automatically distribute their assets according to their unwritten wishes, a dangerous assumption that is proving financially devastating.
The Dangerous Myth of Automatic Inheritance
Mr Emsley highlighted a critical error in public understanding. "One of the biggest misconceptions is that everything automatically passes to a spouse or children when someone dies," he stated. "That is not true unless it is clearly written down in a valid will."
He emphasised that without a legally sound will, the rigid rules of intestacy take over. These rules often fail to reflect modern family structures or personal desires, leading to outcomes that surprise and distress loved ones.
"If your wishes are not documented properly, the rules of intestacy apply, and they often do not reflect what families expect or want," Mr Emsley cautioned. He specifically warned that unmarried couples are at high risk, noting that "it does not matter how long you have lived together" without the legal protection of marriage or a civil partnership.
Understanding Your Inheritance Tax Allowances
The warnings come as IHT continues to generate billions for HM Revenue & Customs annually, with bills potentially running into hundreds of thousands of pounds for estates.
Experts from Martin Lewis's Money Saving Expert team clarified the current thresholds for the 2025/26 tax year. Everyone has a standard IHT-free allowance of £325,000, with 40% normally charged on any value above that.
However, this allowance can increase to £500,000 for anyone who leaves their home to direct descendants, such as children or grandchildren. This enhanced 'main residence allowance' does not apply to other relatives like nieces or nephews.
A crucial point for unmarried partners is that the valuable perk of transferring any unused IHT allowance between partners is strictly reserved for married couples and civil partners. This makes tax planning far more complex for cohabiting families.
The Vital Importance of Proper Planning
Mr Emsley's central message is that proactive, documented planning is non-negotiable. "Good intentions do not survive bad paperwork, and the legal framework does not account for modern family life unless you make it do so," he asserted.
The advice also extends to those who have been widowed. While a widow or widower who inherits their spouse's unused IHT allowance won't lose it if they remarry, there is a key limitation: unused allowances can only be passed on once.
This means if you inherit an allowance from a first spouse, you cannot later pass that same allowance on to a new partner. They would only be eligible to inherit your own personal unused allowance. "Therefore widows/widowers who remarry and who want to take advantage of their first spouse's unused IHT allowance should plan carefully," the Money Saving Expert team advised.
The clear takeaway for all families is to seek professional advice, create a valid will, and understand the tax implications of their personal circumstances to avoid their loved ones facing an unexpected and sizable tax bill.
