Martin Lewis issues chilling warning as cohabiting couples could lose thousands over inheritance tax fine print

Martin Lewis
-Credit: (Image: ITV)


Martin Lewis’ newest podcast offering, the aptly titled Not The Martin Lewis podcast, saw the finance guru delving into the intricacies of inheritance tax with a range of experts in the field. However, the Money Saving Expert is no stranger to the topic and started the show with his top tips, and one major warning.

While explaining some of the exemptions Brits can make the most of to strategically avoid paying as much Inheritance Tax as possible, he highlighted that two techniques rely on a couple being expressly tied together. He explained: “We’re only talking about marriage and civil partners.

“It’s worth noting, therefore, that if you’re cohabiting with someone, they’ve been your life-long partner and you have 722 kids with them, that doesn’t count as marriage,” he explained. Martin also explained that anything a person leaves to their married or civil partner is completely exempt from Inheritance Tax, saying: “You can leave them what you like, inheritance tax will not be paid on it.”

But he added those cohabiting do not get the exemption. So, within the financial system, one of the big benefits of marriage is this inheritance tax exemption and he has previously said that to avoid tax people have to be married.

Citizens Advice has highlighted the potential problems with them advising that it could end up in court: “If you were living with the person who has died but you were not married to them, you would not inherit under the rules of intestacy. However, you could apply to court for financial help. You must have lived with them for at least two years immediately before their death.”

Part of his other tips included the £325,000 cap, which means an estate is not subject to inheritance tax if it falls below this threshold, and can be taken up to £500,000. This only works if the person’s main residence “is left to offspring”.

Martin explained: “That could be biological, foster, step or adopted children or grandchildren. It only applies if your total estate isn’t worth more than £2million.” The finance guru added that Brits can combine these tips to make a supersaver allowance that will be completely tax-free but does once again require that a couple be legally married or in a civil partnership.

He explained: “You can pass on your unused allowance to your spouse, again married or civil partner. If you leave them everything they can then leave £1million, their £500,000 including main residence and your £500,000 including main residence, to their offspring.”

Finally, the BBC star concluded that those still at risk of the 40 percent Inheritance Tax rate after utilising all of these methods can make use of the “gifting rules” that give them a variety of options to try get their estate’s value under the caps before they die.