Billions wasted because Brits don’t sort out inheritance tax, survey shows

News - Tax

Written by Ray Clancy

Thursday, 29 April 2010 10:00

Britons are wasting £2 billion in inheritance tax yet 86% admit to doing nothing about it, according to new research.

Inheritance tax is Britain’s second biggest tax wastage area and over a third of consumers, some 35% support the Tory pledge to raise the Inheritance Tax (IHT) threshold to £1 million, a study has found.

One in three expect substantial tax hikes after next week’s general election but 86% admit to doing nothing to reduce their tax burden, the research by professional advice website unbiased.co.uk shows.

The amount wasted could be set to increase as this year’s Budget announced the IHT threshold would be frozen for the next four years at £325,000 rather than rising in line with inflation.

The research shows one of the main causes of wastage is the inclusion in personal estates of the proceeds of life assurance policies, which if written in trust, would not be subject to inheritance tax.

‘With Tory plans to raise the inheritance tax threshold to £1 million, IHT is now a key topic on the election agenda. Our annual Tax Action report shows that vast sums are being lost from estates every year because the deceased had not made adequate provision for inheritance tax,’ explained chief executive Karen Barrett.

‘Such situations can only bring additional unwelcome stress for the deceased’s family at an already difficult time, as this tax must be paid before the estate is released and any inheritance can be passed on,’ she added.

She added that as well as having your tax affairs organised, it is also crucial you have a valid will in place to ensure your legacy does not involve just leaving a large inheritance tax bill for your loved ones.

‘By seeking independent financial advice, you can calculate your assets and plan who you would like to inherit your wealth and how to do this in the most tax efficient manner. You can then seek advice from a solicitor to prepare a legally valid will,’ she said.

‘Seeking professional legal and financial advice from a solicitor and an IFA means you can get your affairs in order so that your family or friends receive the inheritance you want them to,’ she added.