A personal finance guru has sounded the alarm for cohabiting couples with a stark warning. During his BBC podcast, Mr Lewis shared an extraordinary interaction he had with a taxi driver while on his way into the studio.

The father-of-one recounted that the cabbie, named Joe, flashed his wedding band and credited Martin Lewis with influencing his decision to tie the knot. The key motivator, as discussed by Mr Lewis, was inheritance tax; the driver had heeded advice from a specific Martin Lewis podcast, which highlighted the potential losses their children faced should they pass away unmarried.

Reflecting on the episode, Mr Lewis delved into the advantages of matrimony in the context of inheritance tax: “I thought it might be worth explaining to you what the benefit of marriage within the inheritance tax world is, and it’s actually pretty substantial. When we talk about marriage it applies to anyone who is married or who has a legal civil partnership.

“But this does not apply to you if you are just cohabiting. That was the think with Soho Joe the taxi driver, he and his partner had been cohabiting for 33 years but they didn’t have any legal representation of their relationship.”

He also mentioned, “A legal recognition of your relationship and civil partnership is also a legal recognition of your relationship without some of the, some might say, paternalistic religious overhang that a marriage has.”

Martin Lewis’ two significant marital perks when it comes to inheritance tax:

• Assets left to your husband or wife aren’t taxed
• You pass on your inheritance tax allowance to your spouse – which then goes to your children.

Mr Lewis highlighted the significant advantages of marriage when it comes to inheritance tax, stating: “So the two big inheritance tax benefits. First of all your spouse won’t pay inheritance tax on anything you leave to them. When you die any money, any property, any assets left to your spouse is automatically exempt from inheritance tax.”

He further explained the substantial benefit for married couples: “An even more important inheritance tax boon of marriage is you can pass on your unused inheritance tax balance to your spouse. So in plainspeak you don’t pay inheritance tax on the first £325,000 you leave when you die.

“Above that if you’re leaving your main residence to your direct descendents, so your children or grandchildren or step children, you usually get another £175,000 on top. So that’s £500,000 that you can leave without paying tax on it.”

Lewis continued to explain the transfer of allowances between spouses: “So if you leave everything to your spouse when you die, then you haven’t used any of those allowances and as they’re unused they get passed on to your spouse. That means when your spouse passes away their allowance and yours, which means if you’re leaving the main property, they can then leave a million pounds they can pass on without paying any inheritance tax. That’s a huge benefit.”

He concluded by suggesting that for these reasons, it may be worthwhile to consider marriage or a civil partnership, which offers the same financial benefits: “And that’s why it’s often worth looking at getting married or a civil partnership which counts in exactly the same way.”

The money saving maestro highlighted a compelling case showcasing the difference between married and unmarried couples regarding inheritance tax. He explicates: “When the first one of you dies if you’re not married you leave everything to the other one. Well you’ve just used, because your stuff is worth £500,000, £500,000 of your inheritance allowance. So you have no allowance to pass on to them.

“Your partner now has a million pounds worth of assets when they die their inheritance tax allowance is £500,000. So if they pass that on to your child that’s £500,000 which would pay inheritance tax at 40 per cent which is a £200,000 inheritance tax bill.”

In contrast, he discusses the scenario for a wedded pair: “Let’s contrast that to our married couple who have a million pounds worth of assets. The first one dies, all their assets go to their spouse. Their unused inheritance tax allowance goes to their spouse because they’re passing it to a spouse it didn’t count.”

As a result, when the surviving spouse passes away: “So then when the second one dies they get to leave the entire million pounds to their children inheritance tax free. Saving £200,000.”

For those eager to hear all insights, the full podcast is available by clicking here.