One in four over 50s unsure of inheritance tax liabilities

6 October 2017

Over 50s are in danger of losing vast sums to the Treasury, due to a lack of understanding and preparation for their assets when they die.

According to research carried out by financial services group WAY Investments and shared exclusively with Moneywise, nearly half of over 50s (48%) described their understanding of inheritance tax (IHT) as “not very good” or “terrible”.

One quarter (25%) had no idea if their assets would be liable to IHT when they die, and nearly half (48%) did not realise their estate could be liable to a 40% tax rate.

This revelation comes despite separate research revealing that many over 50s are cutting back in order to leave an inheritance.

With such mixed understanding and preparation for passing on wealth, frugality in later life could prove counterproductive. The Treasury raked in £4.7 billion in 2016 alone thanks to IHT.  

The current nil rate band (the value of your estate that is tax free) is set at £325,000 per person, although this rises to £425,000 if you pass on your home to your children or grandchildren. There’s also normally no inheritance tax due if you leave everything to your spouse or civil partner.

 However, anything above these limits is subject to a 40% IHT charge and this does not just include your property and cash, but extends to life insurance policy pay outs, businesses, investments and even Isas.

Worryingly, one in five (22%) of the people surveyed did not realise that Isas were subject to IHT.

Ian Hobday, chief executive of WAY Investments, comments: “What this survey has shown is the lack of knowledge around the complex and costly issue of inheritance tax. To ensure loved ones benefit from your estate it’s imperative that people understand inheritance tax properly as with some simple measures the family left behind could save hundreds of thousands.”

Lack of preparation

The research also found that on top of a lack of knowledge about IHT and its potential consequences, more than a third (35%) did not have a will. Of those who did, nearly half (47%) had not updated their will for at least five years.

The risk of not having a will means your assets could be heavily taxed when you die, or divided up in a way that you might not see fit


In reply to by anonymous_stub (not verified)

IHT.I am single, and have a will. I will have to pay IHT on everything over £325000.Although I have no family to pass my estate to, the government seems to overlook the factthat single people like me, at age 85, rely very largely on kind and very helpful neighbours and friends to keep going. It seems a pity I can't leave them more due to having to pay the maximum IHT.Hey Ho !!!

In reply to by anonymous_stub (not verified)

I fear I do know how it works. It is a savage tax and totally obnoxious. The limits ought to have been raised in line with inflation, instead they have stood still. Having no children I want to leave my money to my neice and nephew BUT my house alone is now nearly at the exempt limit. It is a small two bedroom house in the south of England so scarcely large. What can I do other than hope for an increase in the limit or a collapse in house prices!

In reply to by anonymous_stub (not verified)

I have a sister who lives in the USA. If she puts aside 300:000 for me in her will, would I be liable for tax on this in this country. Thank you

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