Martin Lewis reveals how you can save £200k in inheritance tax

Martin Lewis reveals how you can save £200k in inheritance taxThe Martin Lewis Money Show

Transcript

00:00Any unused inheritance tax allowance passes on to your spouse.

00:04You don't need to do anything to activate it,

00:06although when you die the executors need to send the documents to HMRC.

00:09To be clear again, this is only if you are married or in a civil partnership.

00:14Living together doesn't count.

00:16Let me show you the impact. Big.

00:20Here we go.

00:22There you are, Mr. Youngerhart, Mrs. Youngerhart.

00:31And these are their inheritance tax allowances. They have one each.

00:34So look, everybody in their estate can give £325,000 and their inheritance tax is paid on it.

00:42Above that, you get another £175,000 if you're passing on your primary home to your direct descendants.

00:50So that's children or grandchildren, including stepchildren, foster children, adopted children.

00:55You pass that on, you get an extra £175,000 as long as your total estate isn't worth more than £2 million where it's gradually taken away.

01:01But we won't worry about that for the moment.

01:03So that is the situation. Now I have some very bad news, everyone.

01:07Mr. Youngerhart has passed away.

01:10But he leaves everything to his wife. There we go. All the money goes across.

01:15But because he has left everything to his wife, he has not used any of his inheritance tax allowances.

01:21And therefore she gets the inheritance tax allowances that he had.

01:26I've just seen your face. You're going, wow, for a couple. Yeah.

01:29Now we see the impact of this. Wait till you hear the maths.

01:31What? I forgot your name. I'm so sorry. Ben. Ben, wait till you hear the maths in a minute.

01:34Right. So now she can pass on £650,000 and another £350,000 if they've got the primary residence.

01:42That's a million pounds. Now let's just imagine they did exactly the same thing, that they weren't married.

01:47So you've got Mr. Youngerhart and Miss Doubt. Miss Doubt. There we go.

01:53In that same scenario, he's left everything to his partner. So he's used up his inheritance tax allowance.

01:59Now, if she leaves everything to the kids, she only has half of that.

02:03So that's £500,000. Going to be paying tax on it.

02:07Well, you know what? Depending on the tax, we could be talking £200,000 of inheritance tax paid because they weren't married.

02:15Have you got the ring yet?