Budget 2024 sees Martin Lewis share 'free' Inheritance Tax loophole

MoneySavingExpert founder Martin Lewis has shared a way to entirely avoid Inheritance Tax - and it involves just one document. The tax - which is actually just paid by about 4 per cent of the population - is triggered when someone dies and leaves assets to relatives or friends.

With the Labour's Autumn Budget awaiting delivery later today (October 30), there are worries around potential changes in the Inheritance Tax laws. However, the financial expert said there's entirely legitimate methods to dodge this tax on amounts up to £1 million. Currently, there's a gift exemption limit of £325,000 before Inheritance Tax kicks in at 40%, but these figures might change after Rachel Reeves' Budget.

Martin Lewis highlighted in the recent episode of the Not The Martin Lewis podcast – available on platforms including BBC Sounds, Spotify, and Apple Music – that by simply obtaining a marriage certificate or a civil partnership equivalent, the tax-free threshold can rocket to £1 million. He advises listeners: "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 elaborates: "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.

"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 continues, reports Lancs Live.

Tamsin Caine, who featured on this week's podcast and represents Smart Financial Planning, pointed out that marriage allows for the transfer of assets to a spouse Capital Gains Tax free. "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 contributed, saying: "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."