Inheritance tax: Warning Britons at risk of 'unexpected and considerable bill'
Published: 24/05/2023- 09:59
Britons are being warned about an "unexpected" inheritance tax (IHT) bill, with almost three in four people in the UK over the age of 50 unaware of the rules around the levy.
A new survey from independent financial advisory firm deVere Group has revealed that 72 per cent aged 50-plus and with taxable assets did not know the IHT threshold was £325,000.
The inheritance tax nil-rate band in the 2023-24 tax year is £325,000, meaning no IHT is due on the first £325,000 of an individual’s estate when they pass away, regardless of who they leave it to.
HM Revenue & Customs (HMRC) reported a 24 per cent surge in the number of people paying inheritance tax in the 2022-23 financial year, which is nearly double what it was in the 2018-19 tax year.
HM Revenue & Customs (HMRC) reported a 24 per cent surge in the number of people paying inheritance tax in the 2022-23 financial year
“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,” Nigel Green, chief executive at deVere Group told Mortgage Introducer.
“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.
“It’s even more troublesome as, in our experience, people feel so strong about inheritance tax: it is the most hated of all taxes.
"People despise the idea of money that they’ve already paid tax on being taxed yet again.
"It’s a human instinct that they would rather their loved ones benefit from their legacy than it being taken by the Government.”
He added that the new HMRC figures imply that more families are suffering from IHT, which could be 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,” he added.
“It’s hitting a growing number of ordinary families every year whose main asset is their family home.”
People’s families are at risk of being hit with an unexpected, and potentially considerable tax bill
There are ways to reduce the impact of inheritance tax which includes establishing a trust, using gift allowances which allow an individual to pass on money to loved ones while shrinking an estate, holding properties as tenants in common with the spouse, and investments that qualify for relief.
Green said: “To mitigate a potential IHT issue, clearly you need to be informed, and planning early with professional advice will be hugely beneficial as it can help you to legitimately avoid leaving your loved ones with huge bills to pay and give them more of your legacy.
“It must be remembered that IHT is not targeted at only the very wealthy individuals any longer.”