Inheritance Tax: Warning as Britons have ‘no idea’ of the scale of their tax bill | Personal Finance | Finance


Inheritance tax (IHT) is chargeable at 40 percent of a person’s estate above a particular threshold – usually £325,000. Understandably, the levy is not well-liked within the UK, with some dubbing it a “death tax” and others suggesting it needs changes. However, until action is taken on the matter, many will have to come to terms with the IHT bill which may be left behind for their loved ones to deal with.

A recent study, however, has shown many have absolutely no idea what their Inheritance Tax bill will be.

This could create chaos for loved ones later down the line, as many may inherit less than they expected due to the tax. 

A consumer investigation undertaken by Time Investments revealed 52 percent of over 55s do not know what their IHT liability will be.

Some 31 percent of those in this age category stated they have never checked IHT rules or how these will apply to them personally.

READ MORE: Money Talk: Inheritance Tax rules help Britons leave up to £1million

It is expected the five-year freeze on Inheritance Tax could rake in an extra £985million for the Treasury.

Over the last tax year, Inheritance Tax receipts hit £5.2billion, showing the impact of the tax on families across the UK.

However, this does not have to be simply accepted by Britons, and there are potentially ways to reduce IHT liabilities.

This can often be achieved through estate planning, but this is a complicated matter which often needs financial advice.

The research from Time Investments showed 72 percent of financial advisers expect to see an increase in the number of investors looking for help with IHT planning.

Indeed, 26 percent are now expecting a dramatic increase in the requests for assistance.

There may, though, be slightly simpler ways to consider reducing an IHT bill legally.

There is normally no Inheritance Tax to pay if a person leaves everything above the £325,000 threshold to certain individuals or groups. 

These are:

  • A spouse
  • A civil partner
  • A charity
  • A community amateur sports club

A person may also qualify to pay Inheritance Tax at a reduced rate of 36 percent if they decide to leave at least 10 percent of their net estate to charity. 

Gifting out of one’s estate may also help to reduce a tax bill in the long run, however, Britons must bear the rules in mind.

There are certain allowances to meet, and the seven-year rule means a certain amount of tax will apply to gifts given in the seven years before a person’s death. 

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