Many people risk leaving their families with hefty tax bills when they die because they are unaware of the current Inheritance Tax (IHT) threshold, according to new research.
Over half of respondents in a poll by Close Brothers Asset Management admitted they did not know the amount at which their estate becomes liable to IHT, which at present is £325,000. Only 47% of the 1,000 respondents with personal assets of over £325,000 knew the IHT threshold and 14% even thought it was £500,000.
The "Heir Today, Gone Tomorrow" study showed that the lack of IHT awareness was also reflected in the significant proportion of people who have not taken measures to cut the size of their IHT liability. Some 34% of respondents with assets exceeding the threshold said they have not prepared a plan to protect their assets. What's more concerning, a similar percentage (32%) of respondents admitted they haven't even considered putting any plans in place for IHT.
The IHT threshold has been frozen at £325,000 for a couple of years and the total sum collected by HMRC is expected to increase by as much as 60% by 2019. As property prices continue to rise, more people will find themselves in the IHT bracket. According to the researcher, this number will grow from 21,000 in 2012 to 42,000 in 2016/17.
As regards the methods that could help bring IHT liabilities down, the seven-year gift rule was the most well-known, although 18% of respondents had not heard of the measure. Awareness about Business Property Relief was among the lowest, with 66% of people saying they did not know about it.