This could leave families with huge bills
Almost three in four Brits over the age of 50 are unaware that the money they want to leave to their beneficiaries could be liable for inheritance tax (IHT), a new survey from independent financial advisory firm deVere Group has revealed.
The research showed that since April 2022, 72% of all new clients aged 50-plus and with assets over the IHT threshold did not know that it 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 he/she dies, regardless of who they leave it to.
The results of deVere’s survey were released a week after HM Revenue & Customs (HMRC) reported a 24% jump in the number of people paying inheritance tax in the 2022-23 financial year – nearly double what it was in the 2018-19 tax 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 (pictured), chief executive at deVere Group, commented. “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.”
Green added that the HMRC figures showed that more and more families are being pulled into the IHT net, 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,” he remarked. “It’s hitting a growing number of ordinary families every year whose main asset is their family home.”
Green, however, pointed out that there are way to mitigate the impact of inheritance tax. These include establishing a trust, using gift allowances which allow an individual to pass on money to loved ones while shrinking his estate, holding properties as tenants in common with the spouse, and investments that qualify for relief.
“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,” he said. “It must be remembered that IHT is not targeted at only the very wealthy individuals any longer.”
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