During the 2016/17 tax year, inheritance tax (IHT) drew £4.7bn from UK consumers, and this figure is expected to rise by a third more over the next five years, according to WAY Investments.
The firm recently conducted a tax survey which revealed that many people aged between 61 and 65 have not got a tax strategy in place, and that 56% of those in that age group have not yet considered making a will.
Due to popular misconceptions, many people are under the impression that their assets are not of a high enough value to be taxed, and many are unsure of which assets are actually subject to tax. The survey found that one-in-four people are unaware of whether there could be inheritance tax liability on their assets, while 40% of the respondents admitted to not having a good understanding of IHT at all.
With the current nil rate band set at £325,000 per person, and despite the introduction of the main residence nil rate band, many homeowners across the country will find themselves subject to IHT. WAY Investments highlighted that it is not just the value of your estate that is included, pay-outs from life insurance policies (if not a trust), businesses, investments and ISAs are counted as part of your estate.
The firm found that over 22% of people surveyed were not aware that their ISAs would be subject to IHT.
Commenting on the findings, WAY Investments CEO Ian Hobday said: “What this survey has shown is the lack of knowledge around the complex and costly issue of inheritance tax. To ensure loved ones benefit from your estate it’s imperative that people understand inheritance tax properly as with some simple measures the family left behind could save hundreds of thousands.
“There’s a wealth of simple measures that can be put in place allowing you and your family to save a fortune in inheritance tax.
“There are many different routes to take depending on your circumstances but a few that most people can relate to include getting your will in order, moving your ISAs to inheritance tax free options and keeping funds safe from inheritance tax in a trust. From our survey we found that 70% of people would want access to the money in their trusts to deal with, for example, help towards paying care fees, so we know how important it is for our clients to have that option.”
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