Inheritance Tax Advice – take it early. According to estate agent Savills, the average price of a property within half an hour’s train ride from London now stands at £458,000. If you add in other family assets, then this often means a large IHT bill would have to be paid.
When an estate goes into administration, HMRC require that the IHT bill is paid before a grant of probate can be obtained. This means that some families could be forced to sell the family home to settle an inheritance tax bill.
So on top of the emotional feelings at having lost a family member, the family home, to which all manner of associations and emotions may be attached could be lost as well. If this is at a difficult time for the property market, then to cap everything a forced sale value might have to be considered.
Yet for many, Inheritance Tax is avoidable, providing you plan early and are willing to pay for quality advice.
There is a fundamental lack of awareness and understanding on the subject. For example:
- Just 14% of people surveyed are aware that the current inheritance tax 0% allowance for individuals stands at £325,000. If the estate is worth more than this, the remainder will be taxed at 40%.
- As many as 78% of homeowners, either haven’t considered estate planning or don’t think they’ll be affected by the inheritance tax rules.
- Only 8% of people are aware that Individual Savings Account (ISA) savings can form part of a person’s taxable estate and would therefore also be subject to inheritance tax.
This lack of awareness is leading to increased revenue for HM Revenue & Customs. It recently announced a record take of inheritance tax for the last tax year, with £4.6 billion due from the estates of thousands of people who have passed away. And inheritance tax receipts are forecast to keep rising, reaching £5.6 billion by 2021. This rise is expected despite the recent introduction of the main residence allowance of £175,000 per person, which applies to estates that include a family home and is due to be phased in over the next few years.
The fact is that more people are sitting on a potential inheritance tax liability, or will do so in the years to come, and are either unaware of it or unsure of what to do about it.
Our research suggests that rather than being a nation of inheritance tax avoiders, most of us are sleepwalking into inheritance tax liabilities, leaving loved ones with a large and unnecessary tax bill to pay.
For most people, the world of inheritance and estate planning is a complicated one, and many believe it doesn’t even apply to them. This is likely to be a costly mistake for many families.
All the more reason why forward planning should be actively encouraged as a lot can be achieved by doing so.