Martin Lewis Money Show – Death Is Where Marriage Really Counts – Inheritance Tax Relief

The recent Martin Lewis Money show covered the topic of marriage and how it can be advantageous to be married or in a civil partnership. In that programme, he mentioned that “death is where marriage really counts” and we are going to elaborate a little bit more on what he may have meant by that.

Inheritance Tax Relief

When you die, the assets you leave behind for your loved ones (“your estate”) may be liable to Inheritance Tax. This will depend on the value of your estate and what Inheritance Tax reliefs you are eligible to claim against your estate.

The current reliefs available are as follows:

1. Nil Rate Band of £325,000 per person;
2. Residence Nil Rate Band of £175,000 per person.

Everybody is entitled to the Nil Rate Band of £325,000. This means that until your estate reaches that threshold there will be no Inheritance Tax payable.

The Residence Nil Rate Band, in simple terms, is in relation to any residential property that you own at your death and is available if you leave this property to your direct descendants (spouse, children and grandchildren). The value of this threshold that you can claim depends on the value of your property, and the total value of your estate.

So why does marriage make a difference?

If you leave everything to your spouse/civil partner on your death, then they will inherit your unused Nil Rate Bands. This is because there is no Inheritance Tax payable on assets left between spouses/civil partners.

Therefore, on the death of the surviving spouse the reliefs would be as follows:

1. Nil Rate Band of £650,000;
2. Residence Nil Rate Band of £350,000.

Please note that this is subject to conditions surrounding the Residence Nil Rate Band, including the value of the total estate being less than £2 million so as not to affect the relief available.

On the death of the surviving spouse/civil partner, if the full Residence Nil Rate Band is available, the surviving spouse’s estate would be eligible for £1 million in Inheritance Tax reliefs.

It is important to review your Will to make sure that there are no clauses that could impact the availability of the Residence Nil Rate Band.

It is important to note that these reliefs only apply to married couples or those in civil partnerships and does not include cohabitees.

Martin Lewis also mentioned Wills and the Intestacy Rules and how that can impact unmarried couples. Look out for our next blog relating that.