Seven in ten people face paying a bigger inheritance tax (IHT) bill than they might need to, despite the fact that four in ten are concerned about paying the tax, according to research, co-sponsored by Canada Life and AKG.
It revealed that three-quarters of individuals had taken no steps to reduce their IHT liability, while only a fifth have taken action.
IHT is applied on a deceased individual’s estate above the threshold of £325,000 at 40%, although many people use various methods to decrease their IHT bill.
For instance, subject to IHT rules, individuals can avoid a charge on assets if they give them to family members as a gift, or if they put part of their estate into a trust.
Afford Bond Tax Director, Chris Regnauld commented: “The standard Inheritance Tax rate is 40%. But it’s only charged on the part of your estate that’s above the threshold. So, for example, if your estate is worth £500,000, and your tax free threshold is £325,000 – the Inheritance Tax charged will be 40% of £175,000 which is arrived at by £500,000 minus £325,000.”
According to the survey, 20% of individuals have taken such actions to mitigate their IHT liability, but there is clearly a huge opportunity for further education and guidance when it comes to inheritance tax planning.
“It’s often difficult to have this type of conversation with family members,” said Chris Regnauld. “But it’s better to make a plan and work through Inheritance Tax (IHT) situations sooner rather than later.”
Talk to us if you need expert tax help or guidance. Email Chris.Regnauld@affordbond.com or use the Contact Us form on our website.