Martin Lewis has issued a “crucial” warning to Britons about inheritance tax.
With official figures showing the number of estates paying the 40 per cent tax charge set to rise from around 40,000 this year to almost 50,000 by 2027, Lewis emphasised the importance of proper estate planning.
The MoneySavingExpert.com founder is urging Britons to utilise wills to slash their inheritance tax bills.
“Sorting a will is crucial if you’ve got a house, savings, a business, or people you’d like to look after when you’re gone,” Lewis stated. He added that without a will, “rigid intestacy rules dictate it and you don’t have a say.”
The money saving experts advice comes as two major will schemes open for bookings, offering an opportunity for individuals to address this often-neglected aspect of financial planning.
In the latest MoneySavingExpert’s Money Tips Email, Lewis highlighted two key schemes currently available for will-writing.
Free Wills Month, running in October, offers free solicitor-drafted wills for those aged 55 and over in select locations across the UK.
Alternatively, Will Aid, open for bookings now and available in November, is available to all adults nationwide with a suggested donation of £100 for a single will or £180 for mirror wills.
The newsletter stated: “If you can’t afford it, you can give less, but please don’t game it.”
Lewis explained that “the two big will schemes have opened up for bookings,” and stressed that these schemes are not just for the elderly.
He said: “This isn’t just for those with grey hair – anyone with dependants should be thinking about this.”
Both schemes aim to make will-writing more accessible, with Free Wills Month hoping for charitable bequests and Will Aid spreading donations across seven charities. Lewis advised booking appointments promptly, as slots can fill up quickly.
The inheritance tax landscape in the UK is becoming increasingly challenging for families. According to the Institute for Fiscal Studies (IFS), grieving families are set to pay £15bn in inheritance tax bills by 2032-33, up from £7billion in 2024-25. This stark increase is largely attributed to frozen tax-free allowances and rising house prices.
In the 2021/22 tax year, a record £6bn was paid in inheritance tax, with 4.39 per cent of deaths in the UK meeting the £325,000 estate threshold to be taxed. This is the highest proportion since 2016/17.
Each individual is taxed at a rate of 40 per cent on all their assets above the nil-rate band of £325,000. However, individual homeowners can leave properties worth up to £500,000 completely IHT-free, thanks to an additional main residence nil-rate band of £175,000.
Writing a Will is a crucial step in minimising inheritance tax liability. Stacey Love, tax and estate planning specialist at Canada Life, told GB News: “For benefactors, writing a will is the most important step you can take to support your loved ones after you’re gone.”
Despite its importance, over half of UK adults (51 per cent) have not written a will, according to research from Canada Life. This oversight can lead to significant financial consequences.
Andrea Rozario, chief corporate officer at Bower Home Finance, warned: “If your wishes aren’t written down in a legally binding document, this can complicate the inheritance process and even result in a higher tax payment.”
Without a will, an individual’s assets will be distributed according to intestacy rules, potentially subjecting the estate to avoidable inheritance tax.
Experts stress that incorporating tax-efficient strategies into estate planning can safeguard assets for future generations while minimising the tax burden.
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A will can significantly reduce inheritance tax through several mechanisms. Married couples or civil partners can take advantage of the ‘spousal exemption’, allowing them to leave their entire estate to their partner tax-free.
This also transfers any unused inheritance tax allowance, potentially enabling the surviving spouse to pass on up to £650,000 tax-free.
Maximising the property allowance is another key benefit. By leaving a home to children or grandchildren, families can utilise the residence nil rate band, increasing the tax-free threshold by £175,000.
Charitable donations in wills offer dual tax benefits. Gifts to UK-registered charities are exempt from inheritance tax, and leaving over 10 per cent of a taxable estate to charity reduces the overall tax rate from 40 per cent to 36 per cent.
Lewis emphasised the importance of these strategies, stating: “The knock-on financial and emotional costs of not engaging are worse.”
