Half the British public is dangerously ignorant of inheritance tax rules and forthcoming reform, with some completely unaware that they will be subject to the charge when relatives die, lawyers have warned.
Research shows that 47 per cent of Britons are unaware of how assets are distributed after death. Another 60 per cent have not drafted wills and another 54 per cent do not have a record of all the accounts and investments held by their partners or other family members.
The issue is exacerbated, lawyers say, by the still-booming UK property market. The average UK house price is now more than £215,000 – £400,000 in London – meaning that many estates will be pushed over the present nil-rate band of £325,000 under which people pay no inheritance tax when pensions, savings and other assets are taken into account.
Reform is scheduled for April, which will go some way towards alleviating the problem. New rules will add an extra £100,000 to the threshold for properties that those leaving an inheritance have lived in and that they are leaving to a direct descendant.
Lawyers have described the reform is the most significant change to inheritance tax for decades. “Many people across the UK will be subject to inheritance tax without even knowing because the value of their estates will be higher than they realise,” said Gillian Coverley, a partner at the national law firm Irwin Mitchell, which commissioned the study.
“There are also many people whose estates are worth considerably more who could benefit from the new rules with a bit of extra planning and organising of their estates.”
She described the forthcoming reform as “positive”, saying that it was “the first time special status has been given to family members”.
Where you are going wrong with inheritance tax planning – http://bit.ly/2oDgG28