Inheritance tax masterclass: how much is due & smart ways to reduce it! Energy price spike – what it really means

21:56I had a situation once where I had a little old lady living very frugally, but she had a shareholding, which had never generated any income, and then suddenly started generating really, truly significant amounts. Good for her. Yes, it was incredible. It had been an investment, I think it had been through at least three generations. But she wanted to give it all away to nieces and nephews. She didn't have children. and we had some difficulty with HMRC on that because they were concerned that she was giving so much away and living on so little and what we did was we went back and showed that she had been living on so little for years prior we were actually successful on that one so it's sort of the reverse of that and indeed if you'd be making gifts of I don't know 10 ,000 pounds every three months for five years and then after that you continued making those gifts but your living expenses dipped for example maybe you'd paid off your mortgage you would be able to explain that it's always making sure that it's explicable I mean in my view there's an obvious intuitive test

23:06Martin Lewis:isn't there I mean this this type of giving is primarily for the people who have been before they're giving were living and probably putting money away in savings or investing because they had surplus income and they didn't need it for their living expenditures if you're if you're on the brink at the moment, it's going to be quite tough to prove that you've got surplus income. I mean, if we boil it down not to your legal standard, Harriet, but to a nutshell of who should be considering this and who shouldn't, that's not a bad rule of thumb, is it? Absolutely. I think that's a really good practical way to look at it.

23:33If you can afford to make the gifts easily, you may well come within this.

23:39Martin Lewis:Yeah. Now, we want to do the lifetime giveaway stuff in a moment, but let's do a question more or two, Adrian, if you'd like. Newman, I had a question in regards to the main residence inheritance tax relief, should I buy a family home with my parents 50-50 split? Would the family home still be eligible for the main residence tax relief if passed down by my parents to myself? So Harriet, you can actually nominate what your main residence is, can't you, in this structure as long as it's provable? Is that how it works? You can, yes. So crucially on Newman's question, it would obviously only be the parents' 50 % that would be eligible for an RNRB.

24:20Martin Lewis:So this is the£175 ,000 extra property? Sorry, yes, it is. Sorry. Yes, sorry, legal jargon. It would only be that and they would need to be able to evidence that it was the parents' residence. It wouldn't matter if it was also his residence, provided that it was their residence, I don't think. So just further on that, because I know, let's say someone has sold their residence because they needed it to pay for care home and it had been a year or two ago, or they'd recently sold... Is there any sort of backdating of this, what counts as a main residence? Could you still get that allowance? How is it defined exactly?

24:55So you can still get the allowance. The best of things in tax law are it's quite... it's quite uh it's not very clearly defined what you can do is you can sell your home under certain circumstances and then an amount equivalent to that last home is relevant for this 175 000

25:19Martin Lewis:pounds additional nil rate band fine so and selling it to pay for care home would count as one of those circumstances would it would yes if you could no longer live in it you don't have to hang on to it to be eligible for the additional nil rate ban, you can sell it and then that sort of amount will still be entitled to a residential nil rate ban, even though it's not a residence anymore. Is there any time limit on that? I don't believe that there is. It's more predicated on why you have left effectively. Martin, can I just quickly add something? Of course, Lucy. You can also downsize, but it needs to have happened after July 2015.

26:00So if you sold your property to go into care prior to July 2015, then I'd recommend you talk to a solicitor about that one.

26:09Martin Lewis:Well, I mean, and I'll be honest, talking to a solicitor or talking to a tax advisor is always useful. Now, if this podcast were a book, inheritance tax will be its spine. We're going to be talking about it throughout and doing more in the pod extras. For now, though, Let's switch to energy.

26:29Martin Lewis:I have something I have to tell you. Yeah, go on. It's a bit of a personal admittance. During the break, studio manager Olivia said to me, Martin, can you speak more into the side of your mic rather than the top? She said, can you lift your mic up? Adrian, I've got a droop problem. Oh, no. Every time I lift my mic up, the mic droops back down. I don't know. I've got some cream for that, actually. I don't know what's going on. If anybody knows how to fix it, that would be very helpful. So if I'm talking into the top of my mic too much, it's just a thing that happens to some of us. Okay. First of all, we should talk about energy prices, Martin.

27:08Obviously, we mentioned it last week, just after the latest Energy Price Cap details had been released. That seems a long time ago, Adrian. The world's changed. Everyone's sort of getting jumpy. What's your take on it?

27:22Martin Lewis:Well, I think they're right to. The wholesale rate of gas, and there are lots of different wholesale rates of gas, but the main one that's looked at for setting the price cap anyway is nearly double what it was at this time last week. And the reason the gas price is so important is gas is such a big factor in our electricity prices that feeds into the price we pay on electricity. So doubling in a week is huge. I need to put it in perspective. I mean, it was about 70p per firm last week. It's currently, as I'm talking, although I checked half an hour ago and it moved that quickly, it might not be, about£1.35.

27:53Martin Lewis:That would still have been relatively low during the peak of the Ukraine gas crisis, the Ukraine war gas crisis that we had, and that went over 600 pence at one time. So we're not in that scale. But the big question here is how long this will last. I think it's probably worth me talking you through the impact of this spike in energy prices on the different types of energy bill that you have. So if we start with the one that most people are on, which is the energy price cap, which affects those in England, Scotland and Wales who are on their firm's standard variable tariff, their do-nothing tariff, their I'm not fixed, or my fix ended and I did nothing tariff.

28:33Martin Lewis:If you're on that, we heard last week that the April price cap will be dropping by 6.7%. That is locked in. So nothing is going to change apart from that in the price cap until the end of June. The impact of this spike will hit the July to October price cap. So, that price cap is assessed over average wholesale rates on a three-month period. And this is why you can start to understand why I say it's not the height of the spike, it's the length of the spike that really matters. You know, the price goes up to an extreme level for three or four days. Yes, it will push the July price cap up a bit, but if it were then to come back down and everything go back to as it was, it wouldn't have that much of an effect.

29:18Martin Lewis:But if this spike lasts four, five, six, seven, eight weeks, then that's a substantial portion of the three month assessment period. So then we're expecting to see the July price hike go up a lot. Now, based on current predictions, and these will change very rapidly because we are in an incredibly changeable global political situation with the Middle East conflict, they're now talking about seeing the energy price cap go up by 10 % in July. Now, I'll just go into this in a bit more detail because it's interesting, then I'll come on to the other tariffs. The interesting point here is, I think from a governmental perspective, in May is when they will announce the July price cap, the end of May.

29:59Martin Lewis:If at that point, then this is all over and energy prices have come back down, I suspect the government will just say, look, you've had time lag protection, your price is going to go up and hey there are lots of cheap fixes now available which they would be if the price had come back down so what we would suggest most people do is they get off the price cap which most people should have got off the price cap before anyway and you get onto a cheap fix so there won't be any intervention that price will go up 10 or 15 percent from july to october and then which is the least used period of the year and then in october it will come back down so i think for the government the real hope is this is all over by that may announcement and I think that's the crucial node period in all this, is what happens by that point.

30:38Martin Lewis:If it's continuing beyond that, then I think they may have to look at some form of targeted interventions, especially if the spike gets even higher than where it is right now. Let me move on. Sorry, I digressed on myself there, but let me move on to the other tariffs. If you're on an existing fixed tariff, then your price is by definition fixed. although on the 1st of April as we discussed last week because of underlying policy changes to energy bills existing fixes will get cheaper on the 1st of April the unit rate for gas and the unit rate for electricity will be reduced the unit rate for electricity by about 3.5 pence per kilowatt hour for gas by about 0.33 pence per kilowatt hour and that will happen on the 1st of April which is an equivalent to for most people a seven to nine percent reduction so if you're an unexisting fix everything's good until the moment your fix ends and then the question is what other tariffs are going to be available and that's the big consternation for those people if you're on a time of use tariff so the octopus has the main ones of those the agile and tracker tariffs you're already paying for the spike so it's those on time of use tariffs which i always define as sophisticated user tariffs they tend to be much more related to the existing wholesale rate so if you're on one of those you'll know this already your price will have already gone up on the back of the spike that we've seen in wholesale gas prices.

31:58And then the final category is new fixes.

32:04Martin Lewis:Now, hopefully, most of you were listening last week when I was telling you to get off the price cap and fix then. If you'd done that then, you would be sitting very, very pretty right now because you'd have locked in a 14 % reduction on your cheapest fix and it was going to get even cheaper on the 1st of April and you would have forestalled all this and you wouldn't need to worry. The problem I have now is over the last two days, pretty much all of the cheapest fixes have been pulled from the market or repriced substantially upwards. This time last week the cheapest fix available was 14 % cheaper than the price cap.

32:35Martin Lewis:Right now it's 6.7 % cheaper than the price cap. That's the very cheapest and there's only one or two about there. There are a couple of comparison sites exclusive that are a bit cheaper. So if you are risk averse, if you are very concerned about energy bills going up and this being a prolonged crisis and you are on a price cap tariff, a standard tariff, there is still time to get a fix that is materially cheaper than the price cap. It won't be anywhere near as good as last week. And of course, there's a risk that if things go back to normal, you would have fixed at too expensive a rate compared to the other fixes that will be available.

33:09Martin Lewis:But if you're worried, try and get yourself a fix. Go to a whole of market comparison site. Make sure you're looking at all the tariffs that are available. Find the cheapest fix you can and lock in on that now, as long as it's materially cheaper than the current price cap. That is the risk-averse move to do. And if you're on the price cap, the comparison should tell you that. And again, if you do get a fix now, it will drop on the 1st of April. One final thought on this. Some people say, well, hold on, what if I get a fix now and they go bust because prices all go too high? If you get a fix now and your firm goes bust, I have to say the financial credence checks that are now done on energy firms since the last crisis have improved.

33:44Martin Lewis:Your credit is protected and you would be moved to a new provider probably onto the price cap. So you would be in no worse a situation, because you'd still be on a price cap, than you are right now. But you may have seen in the meantime. I think I may have covered it, Adrian. That was a bit of a monologue. Sorry. Just an important reminder, that information was correct at the time of recording the podcast. More of those cheap fixes may well have been pulled if you're listening to this later. Somebody's worried about heating oil prices. On Sunday, we played an order for 1 ,000 litres,£645. checked with the same supplier this morning £1 ,480 price per litre from 61p to 239p we did ok but feel for others who only have oil heaters from Peter in Lincolnshire I've heard of it going up 239p does sound extremely excessive remember you've got to go and do a comparison on heating oil it's worth if you're in a rural area I know it's common in Northern Ireland I know it's common in rural parts of Great Britain then it's worth talking to neighbours and other people in your area, often collective buying can cut the cost.

34:49Martin Lewis:So, you know, you get you all negotiate a cheaper price by going with the same oil firm. But yeah, absolutely. Home heating oil, because it's directly linked to the price of oil and gas, has gone up and it goes up immediately. And if you're not lucky, unlucky enough to be coming to the end of your tank right now and having to refill it, it is going to be extremely costly. And sadly, barring, you know, doing the comparison and collective buying, I don't have many solutions on that. We have under-regulated home heating oil in this country for far too long and left people in rural communities in the lurch on it.

35:20Martin Lewis:I've given evidence at energy committees of the House of Commons trying to say we should bring this into proper and better regulation, like we've now brought heat networks into proper and better regulation. And as far as I know, nothing has changed. Another question that's come in by text here. We're literally about to move house. Can we fix and take the fix with us? So, if I get this the right way round, most firms will allow you to port your fix. So if you get a fix now, you can port it. I think the two that don't are OVO and Scottish Power. With them, you won't pay any early exit penalties if you've got a fix and you move house, but you won't be able to port it with you.

35:58Martin Lewis:I just need to say, and we know we're doing this live on air, I know OVO and Scottish Power are the outliers from the rest of the main providers. I hope I've got it the right way round. There's a tiny chance I've just convoluted the two. I don't think I have, but I just need to warn you there's a tiny chance I'm doing this off the top of my head. But yeah, you can generally port. It's called portability. And you need to be looking at that in the terms of the fix before you fix. And then you should be able to port it with you to your new home. And by the magic of podcasts, I was able to check that afterwards.

36:26Martin Lewis:And I was right. With all of the major energy firms, you are able to port a fix, with the exception of Ovo and Scottish Power, who let you leave exit penalty free if you move house. Though, of course, it's always worth checking on an individual tariff when you sign up. And especially with smaller firms, they can have their own rules. Well, we get back on to inheritance tax now. We've got a caller, Sarah in Weybridge. Sarah, what can we do for you? Oh, hello, yes. I wonder if you could give me some advice. So my father has been widowed twice, once was my mother and another, my step-mum. He seems to think he can have three inheritance tax nil rate bans and he owned a house both times his wife died.

37:18So he thinks he can have two 500s and one 325. So a total of 1.325 million. He's gotten a state over 1.5 million and he's concerned about having to pay any inheritance tax at all. So we've told him to give and live, obviously the seven-year rule. But yeah, I'm just a bit dubious whether he's right in thinking he's got a 1.325 as a nil rate.

37:44Martin Lewis:Well, we've got Harriet here, and so we've got a tax lawyer on it. My understanding is you're right, he's wrong. You can only have yours and one spouse's. And in fact, the reason that's important is if you had two people who had both had previous spouses who had passed away, a widow, let's say a widow and a widower, could be two widowers or two widows, but you get the point, then they actually, when I talked earlier that marriage is a really good way to reduce inheritance tax in their cases, If they got married, they're potentially losing their previous allowances from their past spouses. So it could be negative for them.

38:18Martin Lewis:Because I talk about that. I think, Harry, you're going to say you can only have the two, aren't you? The maximum that you can have is a total of two nil rate bands. However, if you had a situation where, for example, the most recent spouse, say, had used half of their nil rate band. but the previous spouse also had some nil rate band you could have the half that the previous spouse had and then some from the first spouse gotcha to a maximum of one extra nil rate band so you the you are completely right as to the outcome the reasoning is slightly different and the only thing to add there is the amount that is available on a transferable nil rate band is the amount of the maximum is the amount of the nil rate band at the time of that first death.

39:11So if you had somebody who died before it was£325 ,000, and you could, that does happen, the maximum would be the maximum that they had there. So I think you said your mother died in 1979? She did, yes. Yeah, so that would be a lesser full amount. But equally, if your step-mum had a full nil rate band, that wouldn't matter because you couldn't get any more than that anyway.

39:37Martin Lewis:And Harriet, just to clarify on the nil rate band, I'm so sorry, that you've got a 325 ,000 nil rate band and a 175 ,000 nil rate band. I presume it's a maximum of one each of those. It's not a combined 500 ,000. No, it's a maximum of one each of those. The residential nil rate band is calculated slightly differently, but in almost all situations it will come out to the same thing. So you can have your 325, your spouse's 320, well, former spouses up to 325 and the same for that 175, your own 175 plus up to 175 for former spouses. I interrupted your question. I'm so sorry. Do carry on. No, that's fine.

40:20So it's a maximum of one million is all that he can have then to pass on. Even though my mum, I never received anything from my mother when she died. Obviously, I was still quite young in the first instance. Yeah, so that is unfortunately correct. There are some other things that you could look at doing. Live and give is actually really not bad advice if you don't want to pay inheritance tax at all. Something that often comes up in inheritance taxes, or that I say a lot, is I say, you, the person passing money on, doesn't have an inheritance tax problem. the next generation does if you want to help them solve that that's fine but you're not obliged to it's not really your problem um so i think it is worth reiterating that that that's on a practical note but you might want to look at if there's a possibility of gifts out of income if there are looking at potentially exempt transfers i think you said your father was 86 is that right he was yes he is yeah so you know whether or not making a gift now and waiting seven years looks like being a viable option maybe um you know that's that's going to be dependent on your father's health

41:32Martin Lewis:let's just do give and live for people who are listening because we haven't talked about it yet and it's incredibly important and i'll do the very simple version first if you give a gift to somebody anything without reservation so this is not a case of saying i'm going to give you my home but I'm going to live in it and not pay any rent. That's a gift with reservation. It's got to be a proper gift. You know, if you were going to do that, you could probably say, I'll give you my home but I will pay you a commercial rent for it. And Harriet can discuss whether that would be acceptable or not. But you give somebody a proper gift.

42:02Martin Lewis:If you live three years, the inheritance tax rate you pay is reduced on that gift. So it's no longer the 40%, it starts to get lower. It tapers down until if you live seven years after you've given the gift, then it is no longer part of your estate because you gave it away more than seven years ago and therefore there would be no inheritance tax on the assets that you give away and that's what give and live is talking about now obviously at your father's age being blunt because we have to be i mean i think you know we'd be hoping the three years uh we'll be getting for that the seven years is a long time and statistically is getting a bit more dicey but every year after three year it improves doesn't it harriet that's absolutely right the percentage starts going down in year three, more in year four.

42:47I think it's 20%, possibly 20 % a year. That seems right. That would taper down to nil. So the rate reduces significantly by the time you get to year, say, five or six. And then after seven years, you have a completely exempt gift. So he could do that. The other thing he might want to think about is something that Martin already mentioned, which is if his primary objection is inheritance tax and you don't need all of his estate, he could look at giving to charities in a value over 10 % of his estate. That's a possibility as well.

43:18Martin Lewis:Now, of course, it's that time of the show where we have to put Adrian to the test in Mastermind, but there's still more to come on inheritance tax, including the big change, which is that pensions from 2027 are going to be included as part of your estate. Plus, we will run through in detail all the different gifting rules and allowances where you can give money away and it doesn't count as part of your estate for inheritance tax purposes. For now, though, play that theme tune.

43:55Martin Lewis:Hello, yes, and I should have thanked our caller too, sorry. Welcome to Money Mastermind. Adrian, the score stands that you've got 16 right and 34 wrong in this three-option multiple-choice quiz, which means, I'm sad to say, you're still... N-B-R-C. No better than random chance. We're going to get this better, though. I've decided I'm going to be positive attitude with you on this, and I'm going to be an encouraging cheerleader rather than a Grinch on the back of it. Adrian, it's March. We've got one day of sunshine. Tomorrow a sideways drizzle is expected, but today no. So you are in a DIY store to buy a barbecue.

44:33Martin Lewis:Right. This isn't a delusion. This is a clever counter-seasonal bargain purchasing strategy. Bravo to you, I say, sir. Bravo. Thank you. Now you're in there and you spot the Flame Daddy Big Meat XL Pro. Labelled£299, you instantly fall in love with it. It can apparently cope with more meats than a politician out canvassing. You take it to the till. It scans at£399. Now hang on, you're thinking. emotionally I have committed to my sausages. The price ticket said£299 and now they're telling me it's£399. I don't believe that's right. So that is the question, Adrian. The price ticket said£299 but it's now at the till£399.

45:26Martin Lewis:Do you have a legal right to buy the Flame Daddy Big Meat XL Pro for£299? A, no. B, yes. C, yes, but only if all the other two Flame Daddy Bid Me XL Pro barbecues were labelled£299 and it wasn't just a one-off price ticket mistake. I, surely not. I don't, no. Surely not what? I think, I think it's no. I think it's A, no. You think you don't have a right? You don't have a right, no. I can't... Because other people would be swapping tickets over, it'd be absolute chaos. Remember the third one is, yes, but only if all the other two Flame Daddy Big Meat XL Pro barbecues were labelled£299, and it wasn't just a one-off price ticket mistake.

46:16Martin Lewis:Say that again. Yes, but only if all the other Flame Daddy Big Meat XL Pro... I wish I hadn't written such a long name for the Nava barbecue. XL Pro barbecues were labelled£299, and it wasn't just a one-off price ticket mistake. So you can assume by that we're saying yes if it was the store who had done the mistake, a systemic mistake. So you've got three options, no, yes. I think I've got...

46:44I'm still going to say no. I'm still going to say no because... I'm still going to say no because I think it's up to them what they select you. Are you locked in on no?

46:55Martin Lewis:I'm locked in. We have the tension bed. Adrian, no. is the correct answer. Like, hallelujah. Hallelujah.

47:08Hallelujah. Hallelujah.

47:10Martin Lewis:Well done. You are a piece of work trying to drag me away. I just realised we had an extra minute. And I also, can I just say well done to Simon for nailing, nailing playing all the different sound at the right points there. I thought that was very good. I've been told since the podcast that was actually studio manager Simeon, not producer Simon. But hey, I got five letters right and thanks to both of you. So let's just talk about this. Well done Adrian, you got one right, I'm pleased to say. The label price is normally in UK law just an invitation to treat. It's not a binding offer and it's worth remembering that because it does mean haggling in store is an option.

47:49Martin Lewis:If it's an invitation to treat from then, you can offer a different price too. So the shop is inviting you to make an offer. The contract is only formed when the retailer accepts your offer. Now, in-store, that is normally by taking your payment. I should note, persistent mislabelling after you've notified them that the price is wrong could be unlawful and you could report that to trading standards because if they're doing it deliberately to mislead, that is a criminal offence. But the accidental misprice that you get would be wrong. Many big retailers, though, do operate store policies or scanning guarantees and will either sell at the lower price or refund the difference or offer another remedy.

48:28Martin Lewis:So it is always worth pointing out, hold on, that this says here and it says back there that it's£299. Can I speak to a store manager? You don't have a legal right, but you might be able to see if they could reduce the price. It is worth noting online, because it's the point that the contract is formed that counts, many people think that's when they pay. Online, it tends not to be when you pay. It's when they dispatch the item. And therefore, that's why and we've seen loads of these price error mistakes before where people have rushed in saying something that should cost, you know, a plasma telly for£4.99 and instead of£499, they've rushed in and they go, I've got a right, I've bought it, I've bought it.

49:09Martin Lewis:Now, if they haven't dispatched it, the contract hasn't been formed and therefore they do have a legal right to cancel, I'm afraid. So those are the rules. Adrian, I'm delighted to say after all that, you've now got 17 right and 34 wrong, you get one more right and you are no longer no better than random chance. Next week. Hello, right. We're into our podcast only extras bit now. And I'm very lucky to still have Lucy Spencer, financial planning partner, UK wealth managers, Evelyn Partners with us and Harriet Brown, tax barrister, chartered Institute of Taxation fellow and presenter of the International Tax Bike podcast, still with us to carry on going through the unsurprisingly enormous number of questions that you sent about inheritance tax.

49:54Martin Lewis:And we're going to plough through as many as we can in the time that we've got. So let's get straight into it. The next question, and we're expecting this, and I think Lucy, it's one for you. Joyce says, please, can you cover the new rules about pensions and inheritance tax and how it works for those who have defined pensions? It seems to penalise those who have defined contribution pots that can be easily valued. So, Lucy, the latest up to date from next year, your unused pension would count towards your inheritance tax assets, wouldn't it? It will do. And Joyce, for your information, it only affects the defined contribution schemes and they are easily valued.

50:34It's valued as at the date of death. So regardless of what age you pass away post April 27, your pot will be in your estate for inheritance tax purposes, subject to those nil rate bounds which we discussed earlier. There is a difference to how they are taxed when they're withdrawn, depending on if you die before age 75 or if you die post age 75. So if you die post age 75, the funds will be liable to inheritance tax at 40%, but then also liable to income tax as at the beneficiaries marginal rate when they take the income out of the pension. If you die pre-age 75, even up to age 74, 364 days, then your beneficiaries can take the money out of pension income tax-free, but they will still be liable to inheritance tax.

51:28Martin Lewis:OK, so I just want to make sure I've got this right. Until the day before your 75th birthday, it counts as part of your estate for inheritance tax, or it will count as part of your estate, the amount of money in your pension if it's a defined contributions pot. That's the money pot. You know, that's when you're saving up and you see you've got an amount of money. It's those type of pensions rather than final salary pensions. Once you're aged 75 and over, if you've got money left in there, then not only will it be inheritance taxable, but when the person who gets the money tries to take the income out, they're going to have to pay income tax at whatever rate they pay.

51:59Martin Lewis:So if they're a high rate taxpayer, you're going to have another 40 % off. It is a double form of taxation. I mean, this is a massive change coming, isn't it, Lucy? And in many ways, because pensions weren't in the inheritance tax regime, many people were sort of operating that they would leave their money in their pension because it was a good way of passing assets inheritance tax free. Has this totally shaken up all the type of inheritance tax planning that you do with clients and thrown it all up in the air? It very much has done. So for years, I've been working with clients that actually were spending down their ISA allowances, spending down their general investments accounts.

52:35Now we're revisiting that planning, especially for those over 75 because of that double taxation rules. When we were speaking earlier, we mentioned gifts out of regular income. Money taken from pensions can class as income. So we are seeing a lot of clients now actually drawing more income to gift away to make those gifts out of regular income.

52:56Martin Lewis:I mean, this is seismic, isn't it, for your world? are the level of incomes that people who come to someone who's a financial planning partner, they're going to be relative to high net worth individuals. And it's a complete change. It is very much a complete change. And there's a lot of pensions out there, which I haven't been touched. And there's some large pensions out there as well. So now we are just revisiting our clients' financial planning, revisiting their future planning in terms of how they prepare for passing on their wealth to their family. And Harriet, is the law locked in now or are there still things to be decided on this?

53:30Yes. So the policy isn't going to change now. This is going to happen. It's still possible that it might be tinkered with in the coming finance bill, but it's not going to change in any material respect, I wouldn't have thought at this stage. Martin, could I add one more thing? Of course. pensions please for everyone out there that has a pension regardless if um it's a large pension or you you don't have an inheritance tax liability but for everyone make sure your nomination of beneficiaries forms are up to date because that really tells the trustees of the pension scheme

54:03Martin Lewis:who you want to pass it to so i put a clip on social media about that very issue yesterday yeah people often think that pensions are covered in their will it's not it's the for a private or work pension it is the trustee or pension provider who decides where your money goes and your nomination form or beneficiaries form or expression of wishes form is what tells them, well, how you tell them where you want it to go. You would have done it when you were signing up, but you'd be surprised how many people get in touch with me and annoyed because, you know, their partner's just died. They're not married and it's gone to their partner's ex-wife, not them because that form wasn't updated.

54:33Martin Lewis:So I would echo your thoughts very much. Let's move on to our next question. Sian, is money paid into a junior ISA outside of the estate for the purposes of inheritance tax in the same way money paid into a pension is. I wouldn't have thought so here. Let's check with Harriet. I don't think there's any special ISA exemption, is there? No. I mean, you could put money into a junior ISA and survive the gift by seven years, but in the hands of the junior whose ISA it is, it would still be within their estate. Yeah. I mean, junior, there's no special rules. So all the other gifting and exchange rules still apply to this but there's no special giving somebody money to put in an ISA rule and we need to come on to the gifting stuff I have it in my questions really interesting one from Celia here Harriet I'll start with you on this can you refuse inheritance if the estate has debts over its value um you can I'm assuming the reason this is being asked is because there's a concern that if you take the inheritance, you're liable for the debt.

55:40And that's simply not true. So realistically, you wouldn't need to disclaim the inheritance. You could simply just ignore it because there wouldn't be anything to inherit once the estate had been wound up.

55:52Martin Lewis:But the difficulty is if you wanted someone had a house and they had lots of debt, you can't just take the house and not take the debt. I mean, it's the estate that would pay the debts effectively, but that would still have to be paid, wouldn't it? Absolutely, yes. So you don't have to pay debts over the value of the estate, but equally you can't just take the property, sadly. Yeah, you've got to take the good and the bad that all comes with it. Gillian, I'm a single person, divorced, so no spousal allowance received. Property and now inclusion of pensions an issue if I die before I spend them.

56:25Martin Lewis:What should I be looking at? I think, Lucy, this is in your bag, isn't it? So what I'd recommend is, depending on who she wants to pass her pensions to, we can look at things like the gifting out of natural and excess income rule, which is immediately exempt. If she has other capital, she could make potentially exempt transfers and also on potentially exempt transfers, any growth on that money is immediately outside the estate as well. So if you give a lump sum of£300 ,000 and then that grows in value because it's invested is only the£300 ,000, which you need to last seven years. The growth is automatically outside the estates as well.

57:06Martin Lewis:So the potentially exempt transfer is the seven-year rule or the three to seven-year rule that we talked about earlier. Let's just, we're going, Sian's question is next, the allowed£250 gifts. Can you give only one£250 gift per person per tax year? Can you give multiple£250 gifts to the same person in a tax year? No, you can't. It's one per person. But let's just do, Lucy, let's go through all those other gift allowances available. We'll start with a£3 ,000 rule, isn't there? Yes. So there's the large gift allowance, which is£3 ,000 per individual per tax year. And what that means is so I can give£3 ,000 of my large gift allowance either to one person or splits between multiple people.

57:50And also I can reclaim a tax year as well. So if you haven't given that£3 ,000 last tax year, you can effectively give£6 ,000 today.

57:59Martin Lewis:So this is just so people understand. This is outside of the seven-year rule, outside of the giving money from surplus income rule, you're allowed, you as an individual can give up to£3 ,000 per tax year without paying inheritance tax on it. How do you denote that you're using this large gift allowance? Do you have to note down that that's what your intention was or is it just back count? so I recommend with all gifts and that's the small gift allowance of the 250 we've spoken about the large gifts allowance of the 3 000 or any gifts actually written down either on a piece of paper or on a spreadsheet and held with your will because when you come some passes away and you come to complete their inheritance tax form there's actually a whole list where you have to detail all of the gifts which you've made leading up to your death so no I definitely make a note of it and put in one column and just put large gifts allowance for this tax year.

58:57Martin Lewis:OK, so I can give money from surplus income. I can give money away as long as I last seven years and it's a gift without restriction. I can give£3 ,000 to as many people. My maximum I can give is£3 ,000, but I could share that between different people. What's the£250 rule? So the£250 rule, effectively, I could stand on a street corner and give£250 to as many people as I wish. What I can't do is give one person£1 more. So if, say, Martin, I was to give you£250, Harriet£250 in this tax year, what I can't do is then come back to you, Martin, and go, I'll actually have another£50 on top of that. How does the£250 small gifts to an individual?

59:44Martin Lewis:So the£250 you can give to as many people as you like, but maximum£250 to a recipient. The£3 ,000 rule is the maximum that the giver can give. How does the£3 ,000 rule and the£250 rule interact? The person who you've given the£3 ,000 to, you can't then give them the£250. OK, so they have to be totally separate. The way I kind of look at it is you give your daughter£3 ,000 and then you give your grandchildren£250. Makes sense. And then Peter, is it really necessary to keep evidence of all gifts over£250 for seven years, given that most people don't know when they're going to die? My recommendation and interested to hear Harriet's views on this as well is if you keep a list of all of the gifts you have made, it will make things so much easier for your executives when they come in to fill in your inheritance tax forms.

1:00:37Martin Lewis:Harriet, what do you think? I completely agree with anything. Keeping contemporaneous evidence as you go along is always going to put you or your estate executives in much better position to deal with HMRC. So, yes, absolutely. It's not that onerous to keep evidence of gifts for seven years, I don't think. So, yes, I would recommend doing it as well. OK, so now I'm going to ask you both a tricky question. So, Lucy, we're going to take your calculator away. You're answering this as a human being outside of your normal place. And, Harriet, we're taking your wig off. I presume you wear a wig sometimes.

1:01:12Martin Lewis:I don't know. I may be wrong. Your barrister's wig off on this one. At what age would you say it is sensible for people to start keeping notes on all this type of stuff? You know, at what point in life do we start to start thinking, well, just in case there might be an administrative issue if I were to pass away? go on harriet let's put you on this one first early 40s genuinely because that's sort of when depressing well you know i i think i'm in my mid-40s and i recently had the surreal experience of having a friend die of cancer and thinking yes that was too early but it wasn't tragically early because it's around this age that these things start to happen so i would say with an abundance of caution early to mid-40s.

1:02:00Martin Lewis:Lucy? So I would say I'm going to go slightly later than Harriet and I'll go in your 50s. That's still depressing, Lucy. Maybe when you've received an inheritance, so your wealth is more, so you start to come over those nil rate bounds. For me, I'm a financial advisor, it's about the amounts and if you've been diagnosed with an illness, start to keep those records then. For me, any point you go over those nil rate bans so inheritance tax becomes a concern for you. And the good news is once you've lived anything that's more than seven years ago we don't really have to bother about that much because that's gone then isn't it?

1:02:40Martin Lewis:Do we still keep records then? I'd recommend keeping records for 14 years just because some allowances may have been used up in the previous year so my advice is 14 years and it'll probably save you some legal costs as well. So we've now done giving gifts away from income. We've given potentially exempt transfers, the if you live longer than seven years, the large gift£3 ,000 allowance, the multiple small gift£250 allowance. But then there are also, I believe, special occasion allowances for things like weddings, aren't there? I don't know if either of you, Harriet, maybe you've got a list of those.

1:03:18I have. I'm looking at the relevant section of the legislation, which is obviously very helpful. So you've got gifts in consideration of marriage or civil partnership, where a parent of either party to the union can give£5 ,000. So if all four parents gave the maximum, that would be£20 ,000.

1:03:37Martin Lewis:Yeah. Parent or step-parent, I'm guessing, as well. Yes. Yes, you could. Yeah. Other people who are relations, so grandparents, could give£2 ,500 and anybody else can give£1 ,000 on the occasion of marriage. okay nice any other allowances in similar similar vein or is it it's all about marriage is it i was just going to also say you can also gift your large gift allowance with that as well so the three thousand pounds we spoke about so it's not exclusive so if you're a parent you could give on someone getting married you could give them eight thousand pounds outside of your estate uh even if you were to horribly pass away the next week yes cool we've got one more question i think and i think we'll stop there hopefully we manage to cover most things that people want colin will a sip a self-invested personal pension drawdown be considered as part of my estate it will be inherited by my only son he's a high rate taxpayer should he keep it invested and can he draw down on it outside of the estate i think lucy that is probably you so the sip will be part of um Collins estate post April 27.

1:04:45If he dies before he reaches age 75, then he'll pay inheritance tax on it. But no, his son won't pay income tax on it. If he passes away post age 75, then his son will pay inheritance tax and then income tax, which is quite significant for a higher additional rate taxpayer. What I would recommend is actually he seeks financial advice with his son to see are there other options? Does his son need the money? Could he pass to grandchildren, for example?

1:05:17Martin Lewis:Very interesting. Both of you, absolutely brilliant. Thank you so much for joining us. That's Lucy Spencer from Evelyn Partners and Harriet Brown, who is the presenter of the International Tax Bites podcast. Thank you so much. Hopefully we have demystified or at least made you understand the complexities of inheritance tax today. that's it for this week we tend to put out a new episode every thursday and monday the monday one is our question time podcast where you can ask me absolutely anything and everything open brackets within reason closed brackets if you've enjoyed it today please tell your friends you've been listening to the martin lewis podcast why not give us a review online too and even better subscribe then your pockets will be pleased with you every week thanks for listening

1:06:06I got meals, I got to pay, so I'm going to work for a while. I got meals, I got to feed, so I'm going to make sure everybody eats. Martin Lewis is the founder of moneysavingexpert.com. But of course, other consumer and price comparison websites are available. You can get in touch with Martin's podcast production team by emailing martinlewispodcast at bbc.co.uk. The offers and rates mentioned in the podcast are correct at the time of recording. However, if you are listening on demand, it's worth double checking as details can date. Remember to subscribe on BBC Sounds and leave us a review however you listen.

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