Martin Lewis says avoid Inheritance Tax legally with £675,000 threshold boost
Money expert Martin Lewis says there's a way you can legally avoid Inheritance Tax by boosting your threshold by £675,000.
Money guru Martin Lewis has shared a fully legal method to add as much as £675,000 to your Inheritance Tax threshold.
Although Inheritance Tax is paid out on any money over £325,000 in your estate, the finance expert has revealed a range of fully legal methods to boost the amount you can pass on to your loved ones without paying any tax on it at all.
Martin then took his The Martin Lewis Podcast listeners through a range of Inheritance Tax tips which could help you avoid paying a tax on any amount up to £1M after you die, a massive £675,000 boost.
Most people don't realise that what you leave to your husband or wife is tax-free.
Martin told his BBC Sounds, Spotify and Apple Music listeners: "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. They weren't married and had no will.
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 added that this amount is also boosted by £175,000 up to £500,000 if you pass on your main residence to your children.
So if your house and other assets are under £500,000 and you're passing it on then it's not an issue and you won't be taxed.
Finally, you can pass ALL of your unused allowance to your spouse. So if you left them everything, they could then leave £1M including a house with no tax - your £325k plus £175K including a house, then doubled by adding your and their Inheritance Tax allowances together.
That means if you follow each of those rules - you pass on a house to your spouse as part of a £500,000 estate, then your spouse passes it on again when they die, you'll have successfully passed down £1M with no Inheritance Taxes.
If you do happen to go over those thresholds, you will be charged at 40 percent. So if you were £50,000 over the limit, you would pay £20,000 in tax.
