A recent article by The Telegraph has detailed the emotional stress that dealing with the death of a loved one can cause, including the anxiety of having to deal with the taxman when it comes to Inheritance Tax (IHT).
A survey conducted late last year asked for people's opinions regarding IHT and Wills and found that 81% of respondents felt negatively toward the taxman when they became involved in someone's affairs after their death. Unfortunately, the involvement of the taxman is something experienced by a large number of people, with government figures showing that 37,000 estates were liable for IHT charges over the 2014/15 tax year.
This equates to 101 families every day realising they have to deal with IHT responsibilities relating to someone’s estate. However, the research also found that while 30% of people expect to leave behind an IHT liability, 40% aren't sure of what IHT entails or if they're eligible.
This lack of awareness could potentially be down to the uncertainty over the changing band rates for IHT, due to be introduced in the next few years. Everyone has an IHT threshold of £325,000 each, or £650,000 for a married couple. This incorporates everything you own – property, cars, savings, investments and valuable jewellery or furniture, for example.
However a "main residence" nil rate band, to be implemented in April 2017, is confusing matters. This new allowance offers an additional £175,000 per person that can be added to their IHT allowance but only if a main property is passed on to a direct descendant.
Along with this change, 69% of respondents said they were unaware of other annual exemptions and allowances in place to help them protect their estate from the taxman, leading to further confusion and frustration.
Commenting on the research, Andrea Pierce, Director of Legal Services at Kings Court Trust, said: “Dealing with the tax matters of someone’s estate is often one of the most time consuming and daunting tasks that an executor can face. Unless you have a good understanding of tax legislation, trying to do the work yourself can cause significant problems should you make any miscalculations. We often see estates where clients have attempted the tax work themselves before turning to us as they have become so confused by what needs to be completed.”
If you would like advice on what tax work needs to be undertaken on an estate, contact our client services team on Freephone 0300 303 9000 for practical advice and guidance.