Martin Lewis has issued a stark warning to cohabiting couples about inheritance tax, emphasising that only married couples and civil partners benefit from key exemptions. In his latest podcast, 'Not The Martin Lewis Podcast', the Money Saving Expert explained that two major inheritance tax reliefs are exclusively available to those who are legally married or in a civil partnership.
Lewis highlighted that anything left to a spouse or civil partner is completely exempt from inheritance tax, but this does not apply to cohabiting partners. '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 said. Citizens Advice warns that unmarried partners may have to go to court to claim financial help, and only if they lived together for at least two years before the death.
Lewis also outlined the £325,000 inheritance tax threshold, which can be extended to £500,000 if a main residence is left to direct descendants such as children or grandchildren. However, this only applies if the total estate is worth less than £2 million. Couples can combine their allowances to pass on up to £1 million tax-free, but again, this requires marriage or civil partnership.
For those still facing the 40% inheritance tax rate, Lewis recommended using gifting rules to reduce the estate's value before death. He urged cohabiting couples to be aware of the financial implications of not being married, as they could lose thousands of pounds in tax relief.
