Nearly a third of over-55s have never checked how inheritance tax could affect them despite many believing their estates will exceed the threshold.
Research from Time Investments found out of 1,019 individuals surveyed, 31 per cent of over-55s did not know how IHT would affect them despite 30 per cent believing their estates were worth more than the current tax-free allowances.
In addition, more than half (52 per cent) of over-55s do not know what their IHT liability could be, compared to 25 per cent who said they were aware of their potential liability while another 23 per cent believed they will not have any IHT to pay.
It also found 36 per cent estimated their estate would be worth more than £325,000 - the current nil rate band - and 20 per cent thought the value was worth more than £500,000 - the current allowance including the residence nil-rate band.
Property wealth is the biggest contributor to the overall estate with 31 per cent of over-55s saying their house was worth more than £325,000.
Despite this, about 28 per cent of over 55s did not have a will in place stating who would inherit these assets.
Henny Dovland, IHT technical specialist at Time Investments, said: “Many over-55s will have estates worth more than the current IHT allowances and it is a good first step to check what impact IHT could have.
“The Budget freeze on IHT allowances until 2026 will inevitably mean more people are likely to face tax bills and it makes sense to start planning as soon as possible.”
According to data from HM Revenue and Custom, IHT receipts for 2020-21 were £5.4bn, an increase of 4 per cent (£190m) on the tax year 2019-20.
The recent Budget decision to freeze both the nil rate and residence nil rate bands until April 2026 is estimated to raise an additional £985m in the next five years.
Last month, HMRC launched an IHT tool in beta via the government’s website to help consumers calculate whether they will need to pay the tax.
Taxpayers enter an estimated value of their combined assets and if this exceeds the threshold for IHT, they are directed to further information on reliefs which could reduce their IHT liability.
Meanwhile, Time Investments has created its own online calculator to forecast a client’s potential future IHT liability.
Time’s IHT calculator factors in the current values and projected growth rates of a client’s property, investments and cash.
The individual can then select the available nil rate band and residence nil rate band allowances, which have been updated to reflect the current freeze.
amy.austin@ft.com
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