Finance guru Martin Lewis has revealed a whopping potential £200,000 benefit of getting married – and it’s all linked to Inheritance Tax.
Happy couples often walk down the aisle for the romantic connection, yet there’s more to marriage than loved-up bliss and the celebration of commitment.
Matrimony comes with a slew of legal perks, and Money Saving Expert founder Martin Lewis has dished the details on a significant fiscal advantage – the Inheritance Tax allowance. This tax is levied on the “estate” of the deceased, encompassing their assets, cash, and belongings.
On a recent episode of his popular ITV show The Martin Lewis Money Show, he informed viewers: “Where marriage really counts is when you die.”
The audience burst into laughter, but Martin was being serious. He clarified: “The first thing to say, anything you leave to your spouse is exempt from inheritance tax, so there is no tax to pay on anything that you leave your spouse – even if you were a billionaire like Bruce Wayne.
“Well, actually, Bruce Wayne/Batman is in America so he wouldn’t count and actually it’s an important point,; you’ve got to be both UK residents to be able to do this or it can get complicated, but anything you leave to your spouse is exempt.”
He elaborated: “Any unused inheritance tax allowance passes onto your spouse – you don’t need to do anything to activate it although when you die, the executors need to send the documents to HMRC. To be clear again, this is only if you are married or in a civil partnership, living together doesn’t count.”
Everyone has a tax-free threshold of £325,000, meaning the first £325,000 of your estate is exempt from tax and any 40% Inheritance Tax obligations are levied on assets above this limit. Homeowners also have a property threshold of £175,000.
Assets transferred between a married couple upon one’s death are typically free from Inheritance Tax. This could result in around a 40% saving, potentially amounting to hundreds of thousands of pounds for the surviving spouse.
What does the government say about Inheritance Tax?
The government’s website guidance states: “There’s normally no Inheritance Tax to pay if either:
– the value of your estate is below the £325,000 threshold
– you leave everything above the £325,000 threshold to your spouse, civil partner, a charity or a community amateur sports club”.
It further adds: “If you’re married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die.”
Martin highlighted the tax benefits for married couples, explaining when they bequeath assets to each other, their tax-free allowances are combined.
This can provide the surviving spouse with a threshold of £650,000 and a property allowance of £350,000 – provided the assets are passed down to children or grandchildren.
He noted: “Depending on the tax, we could be talking £200,000”. Furthermore, assets that have significantly increased in value and are left to a spouse upon death typically receive a new base value for tax purposes from the date of death, all while avoiding Inheritance Tax as well.
This particular segment from The Martin Lewis Money Show was posted on Instagram, sparking a flurry of comments. One viewer humorously remarked: “Good thing I have neither kids nor anything to leave anyone (and I never will). Happy single life.”
While some followers posed additional questions, numerous others expressed gratitude towards Martin for his valuable advice and insights.
