MSE's Martin Lewis shares legal way to avoid Inheritance Tax with one piece of paper

Money Saving Expert (MSE) founder, Martin Lewis, has shared a clever strategy that can completely bypass Inheritance Tax, and it involves just one simple document. This tax is actually paid by a fairly small segment of the population, roughly 4 percent, and it's triggered when someone dies and leaves assets to their family or friends.

Despite worries about possible alterations to Inheritance Tax regulations in the Labour's Autumn Budget set for Wednesday (October 30), the expert says there's entirely legitimate methods to dodge this tax on amounts up to £1 million. At present, you're allowed to gift up to £325,000 without incurring Inheritance Tax, which is levied at 40 percent on any sum above this threshold – a figure that could change based on Rachel Reeves' announcement.

By acquiring just a marriage certificate, or a similar document in the case of civil partnerships, your non-taxable limit could surge to £1 million, according to the finance pundit. Speaking on his latest episode of the Not The Martin Lewis podcast available on BBC Sounds, Spotify, and Apple Music, Martin Lewis this week advises: "When you get married you can pass on anything you like when you die and there is no Inheritance Tax on it. But arguably even more importantly than that, you can pass on your unused allowance."

He continues: "So you get £325,000 that is exempt from Inheritance Tax, and a possible £175,000 on top if you're passing your main home onto your descendants. But if you're passing it on to your spouse and they pass it on, then they get your allowances too which means add them all together and that's £1M of property and estate that can be passed onto direct descendants without any Inheritance Tax.", reports the Express.

"If you weren't married - and by married we also mean civil partnerships here - you'd only be able to pass on a maximum of £500,000", he adds.

Tamsin Caine , who also appeared on this weeks podcast, is from Smart Financial Planning who further highlighted that being married allows you to pass on any of your assets Capital Gains Tax free, to your spouse. "If you're a higher rate taxpayer and your spouse is not, she can have the assets in Capital Gains Tax at her rate."

She further added that marriage offers better protection for shared assets even if the couple doesn't stay together for life.

Lawyer Matthew Taylor also chimed in adding: "You are better off if the relationship ends. You're looking at how can you slice the pie taking into account the assets and mortgage capacity of everyone to allow both parties to rehouse so a couple with two kids a boy and a girl can have a three bedroom house each, can we do that, how can we do that, and if not, what's the best that we can do with those resources? That's going to be the general approach."