£17bn per year still held in cash at death

Over £17 billion of assets owned at death by UK citizens is held in cash, an average of £69,000 per estate, according to analysis of HMRC figures by Equiniti Benefactor. Unsurprisingly, residential property accounts for a majority of inherited wealth, accounting for £43 billion, 54 per cent of the total wealth inherited in the UK each year. Securities, usually held as stocks, shares or bonds, account for £10 billion.

Stuart Simpson, head of Equiniti Benefactor, said the figures highlight the importance of financial planning in later life. “For estates to be holding nearly £70,000 in cash at the point of death raises questions about how people are handling their finances in later life,” he said. “Even through the process of probate, this wealth will be eroded through inflation, while a pot of money held in cash throughout retirement will suffer more serious problems.

“The HMRC figures show that around a third of estates that include a property now break the inheritance tax threshold, demonstrating that estate planning should be a key part of our financial lives,” Simpson continued. “Inheritance Tax can be a nasty shock for those who are not aware of their limits and the fees their loved ones may incur on wealth that is being passed back down to family and friends.”

Inheritance tax is currently paid on less than five per cent of estates left at death – about 25,000 people, but raises more than £5 billion per year for the Treasury. The current threshold for the 40 per cent tax is £325,000, or above £450,000 if a family home is given to children or grandchildren.

Critics of the current system include those who say the very wealthy usually find ways to avoid paying the tax through careful financial planning. Various reforms relating to the tax treatment of large gifts made by individuals to friends and family during the seven years before their death have been proposed. The Labour Party is thought to be considering replacing the tax with a lifetime gift tax levied on recipients of assets worth £125,000 and over, which could raise up to £15 billion per year.

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