Martin Lewis's little-known advice to save on inheritance tax

Money-saving expert Martin Lewis has offered a beacon of hope for those fretting over inheritance tax, highlighting a lesser-known piece of legislation that could ease their worries.

Discussing the topic on The Martin Lewis Podcast, which listeners can find on BBC Sounds, Spotify, and Apple Music, he noted that many of his social media followers have expressed concerns about the tax implications after death. Inheritance tax is levied on an individual's "estate" this includes property, money, and possessions.

Martin shed light on several legal methods to sidestep this tax. A significant point that often goes unnoticed is the tax exemption on assets passed to one's spouse.

He clarified: "Most people don't realise what you leave to your husband or wife is tax-free. 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."

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However, he stressed that this exemption strictly applies to legally married couples or those in a legal civil partnership. Cohabiting partners, sometimes referred to as common-law spouses, do not qualify under this rule; a formal marriage ceremony is essential for the exemption.

Despite the anxiety surrounding inheritance tax, Martin reassured that it's a concern for only a few, as the tax is applicable only if the estate exceeds £325,000.

He reassured: "Most of you shouldn't be worrying about Inheritance Tax as only one in 25 estates pay it. Only those at the higher end of the wealth scale are impacted by it."

He elaborated: "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."

The finance whizz also pointed out that the £325,000 threshold can increase by £175,000 to a total of £500,000 if your main home is passed down to your children, and this includes adopted children and stepchildren.