A staggering seven out of ten Britons aged over 50, who are likely to be subject to inheritance tax (IHT), are unaware of the tax implications for their beneficiaries, a new survey reveals. This lack of awareness could potentially result in families facing hefty tax bills.
The survey, conducted by deVere Group, a global independent financial advisory, asset management, and fintech company, indicated that 72% of all new clients aged over 50 and possessing assets exceeding the IHT threshold, were unaware of the limit being set at £325,000.
The nil-rate band for inheritance tax for the 2023/24 tax year stands at £325,000, meaning no IHT is due on the first £325,000 of an individual’s estate upon their demise, irrespective of the beneficiaries.
The release of deVere’s survey comes a week after HM Revenue & Customs (HMRC) reported a 24% surge in the number of people liable for IHT in the 2022/23 financial year. This figure has almost doubled since the 2018/19 tax year.
Commenting on the findings, Nigel Green, CEO of deVere, expressed concern, saying: “It’s very worrying that those with assets that could be raided by IHT had a lack of understanding about what is likely to happen. It puts these people’s families at risk of being hit with an unexpected, and potentially considerable, tax bill at the point of the death of a loved one.”
Green added that the distaste for inheritance tax is common among individuals as it signifies the government taxing income that has already been taxed. “It’s a human instinct that they would rather their loved ones benefit from their legacy than it being taken by the government,” he said.
He continued by explaining the rise in IHT figures, saying: “The HMRC figures show that more and more families are being pulled into the IHT net. This is largely due to rising property prices and the frozen IHT threshold. IHT is very clearly no longer just for the super-wealthy, as it was originally intended. It’s hitting a growing number of ordinary families every year whose main asset is their family home.”
However, Green stressed that early planning could help mitigate the impact of the tax. Strategies such as establishing a trust, utilising gift allowances, holding properties as tenants in common with a spouse, and making eligible investments can help individuals pass on more of their legacy to their loved ones.
