Inheritance tax drew £4.7bn from UK consumers in the 2016/17 tax year, and is estimated to increase by a third more over the next five years
A reluctance to use IFAs is key to the rise in tax bills. Inheritance tax rules are notoriously complicated and although it can cost people with significant assets a sizable sum to employ an expert to sift through their finances it is worth it.
Roger Clark, head of wealth management at Brown Shipley, added: “It’s so easy to put this kind of financial planning to the back of your mind. While you may live another 20 or 30 years past retirement, which is typically when people start to think of this issue, there is a chance you may die earlier.
“The last thing you’ll want is for your family to have to rifle through your finances to ensure the tax office is satisfied.”
HM Revenue & Customs has attributed rising IHT receipts primarily to rising asset values, with residential property making up around a third of the total value of taxpaying estates.
As the average value of estates rises, an increasing number of estates are now valued over the IHT nil rate band, which has been frozen at £325,000 since April 2009.
Tom Selby, senior financial analyst at AJ Bell, said: “You can’t really underestimate how difficult inheritance tax rules are. If you have significant assets you, or rather those you intend to inherit your assets, can expect to face a high tax bill.
“HMRC is reaping in a massive sum in tax from inheritances that could be avoided if the right measures were put in place. Yes, it may cost hundreds or thousands of pounds to get it right, but the amount you pay now will be less than that given to the tax office.”
Stephen Moore, head of content at Drewberry Insurance, said: “Inheritance tax is not on the radar. When you think of the damage it can cause, coming at the worst possible time, when you’ve just lost a treasured loved one, it’s shocking.
“You could have paid an adviser say £2,000, but if you didn’t you could end up passing HMRC more than 100 times than sum.”
According to HMRC inheritance tax receipts are at their highest level since 1986, touching £4.84bn for 2016/2017. This is 4 per cent higher than the previous year and the highest level since the current system was introduced.
Since April 2017 there has been a £100,000 nil-rate band when a residence is passed on death to a direct descendant.