Less than four in 10 are aware of inheritance tax rules
Research conducted by wealth manager Quilter found only 37% of Brits are aware of the regulations for passing on wealth to family at death.
Only 41% of people surveyed knew about the residence nil rate band (RNRB), which is an additional allowance on top of the basic inheritance tax threshold.
Less than half of respondents were aware of other fundamental inheritance tax rules, such as the £3,000 gifting limit or the £325,000 nil-rate-band.
Although respondents were unsure how the regulations work, 60% felt the rules would affect the decisions they make about passing on wealth. While many people recognise that the regulations are important and want to factor them into a financial plan, they struggle to understand how they work in practice.
Time for an overhaul
At the end of last year, the Office for Tax Simplification (OTS) published the first in a series of reports exploring how inheritance tax can be simplified. This report identified numerous areas of confusion and complexity around IHT, but the recommendations focused primarily on the administrative burden.
The second report, which is currently being produced, is likely to make recommendations about how the system can be simplified.
Rachael Griffin, tax and financial planning expert at Quilter, said: “In the modern world, families are increasingly becoming more complex and we need a tax regime which functions with this in mind.
“The RNRB is a prime example of an over-complicated tax policy which no longer reflects a modern family set-up, as it depends on a number of factors, including your marital status and who inherits the family home.”
She believes that these kinds of rules should be reviewed, so people have the freedom to gift to whoever they want and are not constrained by antiquated societal rules.
It is worth noting that the Treasury collected a record £5.2bn in inheritance tax last year.