Martin Lewis has reassured people concerned about Inheritance Tax that they shouldn’t worry after all. The financial expert said nearly half his followers admitted to being anxious about the tax on their estate when they die – but that the reality is the vast vast majority will never pay a penny.
On The Martin Lewis Podcast, available on BBC Sounds, Spotify, and Apple Music, Martin provided listeners with a range of Inheritance Tax tips which could help people avoid paying a tax on what you pass on. He said: “Most of you shouldn’t be worrying about Inheritance Tax as only 1 in 25 estates pay it.
“Only those at the higher end of the wealth scale are impacted by it, only 4 per cent pay it, although many more – 30 to 40 percent of people fear it.”
Many aren’t aware that any inheritance left to a spouse is not subject to tax. He added: “Anything you leave to your spouse is exempt, so you can leave whatever you want to your husband or wife and there is no tax on it.
“But crucially this only applies to people you got married to in a legal ceremony or people you are in a civil partnership with in a legal ceremony.
“If you have been cohabiting and you are what they call common law husband and wife, or husband and husband or wife and wife, it doesn’t count. It has to be a legal marriage ceremony.”
Martin heard from someone whose partner died suddenly after 36 years together, not having been married and leaving no well, reports the Express.
Their children paid£97,000 Inheritance tax because of it. He continued: “If your estate is under £325,000 you don’t pay any Inheritance Tax on the first £325,000.
“Now your estate means all your assets including property added up. So if you are worth less than £325,000, Inheritance Tax just isn’t an issue for you.”
Martin went on to note that this threshold increases by an additional £175,000 up to £500,000 if you pass on your main residence to your children.
Finally, you can pass ALL of your unused allowance to your spouse. So if you were to leave them everything, they could then leave £1M including a house with no tax.
If you do happen to go over those thresholds, you will be charged at 40 percent. So if you were £100,000 over the limit, you would pay £40,000 in tax.
