The lack of awareness around inheritance tax (IHT) in the UK has increased in the last year, with half (50%) of over-45s admitting to be unaware their main property could be subject to IHT.
According to Canada Life’s latest edition of its annual report on IHT, the proportion of those unaware their main property may be subject to IHT has risen sharply from on-in-three (36%) a year ago.
The lack of knowledge extends beyond property to other assets too: of the 1,002 UK consumers surveyed, more than three-fifths (62%) did not think their pension savings are subject to IHT, compared to 57% a year ago. Additionally, two-thirds (66%) were unaware agricultural land also carried IHT liabilities.
The report found the majority (71%) of the UK population is unaware of the threshold they are taxed – set at £325,000.
Confusion persists around the nil rate band and the rate at which assets above the threshold are taxed (40%). The percentage of those who do not know what this rate is has remained broadly the same year-on-year (54% vs 55%).
Furthermore, just one in ten (9%) of over-45s are aware of the rate that applies when at least 10% of a person’s estate is left to charity – currently set at 36%. Slightly less (28%) know the annual exemption rate they are entitled to (up to £3,000) than last year (32%).
Canada Life senior technical manager Neil Jones said: “IHT ignorance is rising at an alarming rate in the UK, and there is no indication that this will stop anytime soon.
“The lack of knowledge about the tax threshold on which assets are subject to inheritance tax has the potential to destabilise estate planning and disrupt plans for people to pass their wealth onto future generations.”
Last years report revealed that over three quarters (77%) think the UK’s inheritance tax rules are too complicated, yet despite this, only a third (33%) sought professional advice on inheritance tax planning. Of the proportion who sought advice, over two fifths (42%) spoke to a professional financial adviser, while more than one in ten (16%) conducted their own research via the Internet.