Over 50% had no idea what the current IHT threshold is and a further 23% gave an incorrect figure. This is despite new figures revealing that the average UK house price is now nearly two-thirds of the IHT threshold compared to 32% in 1997*.
According to the research, more than half of people do not think that the IHT threshold is ever likely to impact them and a further one in ten just don' t know. Even amongst those with assets of more than £50,000 or a house worth more than £100,000, only half felt they would ever be affected by IHT.
Whilst only a fifth of respondents have not taken any steps to minimise IHT, the most popular means is taking out life insurance (50%). But experts warn that life insurance should only really be used in estate planning after all other possibilities have been explored as it is a means of paying the bill, rather than minimising it. Other measures that people have taken are:
- Made a will - 41%
- Donated to charity - 20%
- Spent it - 20%
- Made gifts to family - 17%
- Set up a trust - 9%
- Sold assets - 6%
To help people calculate their wealth and find out if IHT is likely to impact them, Barclays has launched a new micro site including an IHT calculator which is located at www.barclays.co.uk/estateplanning and produced a booklet called 'A guide to inheritance tax - why pay more than you need?'. They both outline how to minimise the potential impact of IHT and give advice on how to draw up a tax efficient will. People can obtain a copy of the booklet
Steven Ingledew, director, Barclays Financial Planning, said: "Unfortunately the term 'Inheritance Tax' still suffers from the misleading image that it is a minority tax and as such many people remain unaware it could impact them and their families. As there are three times as many people now affected by IHT threshold since 1999, it is essential that more is done to help those affected to reduce the impact. Rising house prices have played a significant role with the average house price now standing at £179,486**.
"With so many steps people can take to make sure their money ends up in the hands of those they want it to, that we have launched a national campaign to raise awareness of how people can stop their money being handed over to the tax man, who is likely to receive £2.8bn from IHT in 2004/5."
Even though making a will is the first, most important step in estate planning, allowing the other arrangements to potentially reduce IHT, nearly one half (48%) of those with children and nearly one fifth (19%) of those over 65 revealed they had not written a will. Reasons such as haven't got round to it', 'too young' and 'not enough time' are cited as the most common reasons why not. With no IHT planning on an estate of £750,000 left equally to three children, the Inland Revenue would be the biggest beneficiary receiving £194,800, compared to the childrens' £168,400.
The research revealed that the older age group are very much still in the dark, with one third of people between the ages of 55-64, and nearly half of those over 65 claiming not to know what the current IHT threshold is.
