A recent poll, conducted by Canada Life, highlighted the confusion surrounding Inheritance Tax thresholds.
It was found that 70% of UK adults over the age of 45, and with assets over the £325,000 individual Inheritance Tax threshold (IHT), were not aware that their assets had met this threshold. This is said to be an increase from 61% in 2016. A further 55% of people were not aware of the rates at which assets above the threshold are taxed.
60% were unaware that the following items are liable for Inheritance Tax:
- Pensions
- Business assets
- Life Insurance Policies (not held under trust)
- Savings
- Vehicles
- Non-exempt gifts given in the last 7 years.
25% of people did not know that their main home is liable for Inheritance Tax; 28% were unaware that savings are liable; and 42% did not know that ISAs are. 51% also did not realise that pensions are liable.
The Head of Distribution Services at Canada Life, Karen Stacey, said:
“There is a disturbing lack of knowledge which will undoubtedly translate into unnecessarily high IHT bills.
“For many people, their single largest asset is their house – it’s what they have worked their entire life to own and many have benefited from an extraordinary increase in its value. Their hopes for securing their children’s and beneficiaries’ financial futures rest on being able to pass on as much of its value as possible.
“Unless people learn more about taxes and actively plan the future of their estate, the government is in line for a large, ongoing, and often unnecessary windfall.”
Although the Government has requested that the Office of Tax Simplification make recommendations on how to simplify IHT, this will take some time.
Confused about Inheritance Tax or about what to do to mitigate its impact? Call us; we’re here to make it easier to understand.