£550m to be paid in unnecessary inheritance tax this year
The report, issued by unbiased.co.uk in partnership with Prudential, suggests that total wastage on unnecessary inheritance tax will be £20m higher than last year, and an increase of £78m on two years ago. Public survey findings included in the report indicate that over one in five (22 per cent) have no plans to seek financial advice to help them reduce IHT.
“Inheritance tax planning is often not at the top of people’s to do lists. Even when it comes to financial planning, often other more immediate forms of tax planning, such as income tax, can take precedence,” said Les Cameron, head of technical at Prudential.
“The beneficiaries of good inheritance tax planning are of course those who will inherit your estate when you die and it can make a substantial difference to the amount they will receive. There are a number of ways to reduce your inheritance tax liability, ranging from pretty straightforward options to more complex ones. The best way to find out what you could save is to seek professional financial advice.”
A common shortcoming identified in the report is a failure to place life protection policies under trust; this can reduce a £100,000 life insurance pay out by as much as £40,000 (if an individual’s estate is worth more than £325,000).
The report also speculates that the number of estates that will face IHT liabilities will increase in the near future, due to ever-rising house prices and an improving economy.
“Inheritance tax is incredibly emotive – people want to leave their estate to loved ones, but without tax planning you could also be passing on a hefty bill,” said Karen Barrett, chief executive of unbiased.co.uk.
“There are several things that can be done, with the help of an adviser, to significantly reduce the bill your loved ones will face. Remember too that liabilities can change – for instance, gifts can become taxable if you die within seven years of making them. Of course no-one knows when this will be, so it’s best to talk to an adviser as soon as possible.”