After the Tories proposed to raise the IHT threshold to £1 million on Monday, more people have been alerted to the current £300,000 ceiling for inheritance tax, however few are taking steps to mitigate against the impact it will have upon their heirs.
Bradford & Bingley has found that nearly two thirds of Britons are still failing to seek advice about how best to minimise their IHT liabilities. Even more shockingly, six in every ten people between the ages of 35 and 50 haven’t even made a will, despite the predicament this could leave their dependents in if they were to die unexpectedly.
In addition, IHT must nearly always be paid upfront before an estate is released, meaning that the 28 per cent of Britons who wrongly believe that they would be able to pay an IHT bill by simply deducting it from their inheritance could be in for another nasty shock.
Ironically, the widespread failure to seek advice on IHT planning has come at a time when higher property prices means greater numbers of people are finding themselves liable for the 40 per cent tax due on everything owned over and above £300,000.
Even though the average house price in some areas of the country tips the scales at over £220,000, once the value of other assets such as savings, life cover, shares, jewellery and cars is included within the estate, £300,000 can easily be reached.
There are two main reasons stopping Brits addressing their IHT responsibilities; a refusal to deal with personal affairs and set everything in order, or the underestimation of their personal wealth alongside their tax liabilities.
Myth or reality?
Bradford & Bingley’s research also highlighted some of the prevalent misconceptions surrounding IHT. A third of people didn’t know that items or assets covered in a will are liable to IHT and only 52 per cent could correctly identify that the current rate of tax was 40 per cent – although this rose dramatically to 71 per cent of those earning more than £55,000.
Of those who haven’t taken advice to plan their estate, more than one in 10 said this was because they had already written a will, although the reality is that having a will has little bearing on minimising a person’s IHT liabilities.
Men fare better than women on the inheritance front. When it comes to receiving an inheritance, the survey found that men are typically left better off than women, with almost twice as many men (23 per cent) as women (14 per cent) having inherited items and assets worth upwards of £50,001 in the past. The research also found that men were more likely to be planning to leave an inheritance of greater value than the IHT threshold of £300,000 than women.
Men and women’s differing attitudes towards death were also revealed by the research, which found that nearly twice as many women as men haven’t made a will because they don’t want to have to think about death.
Andrew Stead, head of wealth at Bradford & Bingley, said: “Despite the avalanche of column inches in recent years on the importance of planning for IHT, too many Britons are burying their heads in the sand and failing to take advice about how best to plan their estate.
“This could mean 40 per cent of everything owned over and above £300,000 bypassing your loved ones on your death and instead going straight to the Inland Revenue.
“While it’s no surprise that planning for death is not at the top of most Britons’ to-do list, by seeking advice about how to mitigate against IHT and planning their finances in a tax-efficient way, people can protect their hard-earned assets and protect their families from the burden of financial uncertainty in the future.”
Loading ...