House Of Lords Considering Proposal To Amend Inheritance Laws For Siblings

Cohabiting siblings could find themselves free of inheritance tax on property left to each other if a new rule, currently being considered by the House of Lords, becomes law.

Conservative peer Lord Lexden has introduced a new bill to address what he calls the ‘”worst injustice” of cohabiting siblings facing large inheritance tax bills. The bill stipulates siblings must have lived together for at least seven years, and the surviving sibling must be over 30.

The move follows the high-profile case of Catherine and Virginia Utley, whose case to be considered exempt from inheritance tax on assets left to each other was rejected. The pair have lived together for over 30 years; when one of them dies, the other will be forced to sell the family home in Clapham due to a huge £140,000 inheritance tax bill.

Currently, married couples and civil partners are exempt from inheritance tax on property left to the survivor. This net recently widened with the introduction of heterosexual civil partnerships on the 31 December 2019; giving another option for couples who do not wish to marry – as well as more legal protection.

The change in rules could go some way in addressing fast-rising house prices and skyrocketing inheritance tax bills; the Office for National Statistics (ONS) found in its Families and Households survey that multi-family households are the fastest-growing household type in the UK.

However inheritance tax experts say the move does not go far enough to protect the many households affected by growing inheritance tax bills.

Expert Opinion

“While I’m sure cohabiting siblings will be pleased at the news that this is a priority in Parliament, the bill only goes so far to address the much bigger issue of the lack of legal protection for cohabiting couples.

“There are also plenty of other platonic cohabiting households that will want to be recognised as well such as parents and children, or friends who own property together. There is a big question over where exactly the line is drawn and whether the new rules will be open to abuse.

“Meanwhile, there are millions of cohabiting couples in the UK who would be in exactly the same position as these siblings, and yet will not be catered for.

“All the tax planning in the world will not change the fact that cohabiting couples do not have any rights to their home if their partner dies, and the law is massively behind other countries in this regard. It is high time the issue was addressed once and for all.” Kelly Greig - Partner

Cohabiting couple households have grown faster than married couple and lone parent families, jumping up almost 26% from 2008 to 2018.