Martin Lewis says 'most' can avoid new Inheritance Tax rules after Budget

Martin Lewis says "most" can avoid new inheritance tax rules from the Labour Party government in the wake of the Budget. The BBC and ITV star's team at Money Saving Expert have offered their expertise via the MSE website after Chancellor Rachel Reeves' landmark address.

It said: "Pensions will be subject to Inheritance Tax (IHT) from April 2027, the Chancellor has announced, though the vast majority of estates will still not pay IHT despite the changes." Inheritance Tax is sometimes paid on the "estate" of someone that has died - this includes property, possessions and money.

Inheritance Tax is only due for wealth transferred within seven years of death. If there is Inheritance Tax to pay, the standard rate you pay is 40% above anything above threshold, which is normally £325,000 - although this is often higher depending on who you leave your estate to.

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For example, there is no Inheritance Tax to pay when an estate is left to your spouse or civil partner. Ms Reeves said: "Only 6% of estates will pay Inheritance Tax this year. I understand the strongly held desire to pass down savings to children and grandchildren, so I am taking a balanced approach in my package today."

Under current rules, if you give away your home to your children - this includes adopted, foster or stepchildren - or grandchildren, then the Inheritance Tax threshold can increase to £500,000. This includes the basic £325,000 allowance, plus an additional £175,000.

If you are married or in a civil partnership, any Inheritance Tax allowance that isn’t used can be passed on when someone dies. There are also ways to reduce how much Inheritance Tax is paid on your estate, too, MSE has correctly pointed out.

Your rate of Inheritance Tax on some assets is reduced from 40% to 36% if you leave at least 10% of the net value after any deductions to a charity in your will.