Martin Lewis explains 7-year rule over tax on savings

Martin Lewis explains the seven-year rule regarding inheritance tax on savings gifts, particularly for Junior ISAs. He clarifies that Junior ISAs are not protected from inheritance tax and that the tax-free element applies only to income (interest), dividends, and capital gains. The seven-year rule applies to all gifts, including those for Junior ISAs, meaning gifts must be made with the expectation of not receiving them back within seven years to avoid inheritance tax liability. This rule applies regardless of the type of gift, whether from income or savings. Additionally, there are annual gift allowances: £3,000 per year per person, £250 for small gifts to different individuals, and specific allowances for weddings or civil partnerships (up to £5,000 for parents, £2,500 for grandparents). Inheritance tax applies at 40% on assets over £325,000, with additional allowances for main residences transferred to direct descendants. Unused allowances can be carried over to a surviving spouse or civil partner, potentially allowing assets up to £1 million to be tax-free.