A survey has found more than half of retirees are “unaware” of the inheritance tax thresholds.
The study by retirement specialist, Just, revealed 59 per cent of respondents did not know the threshold for the value of an estate, while 41 per cent did not have a “clear understanding” of rules around inheritance tax in general.
However, it found there was slightly more awareness of the IHT thresholds among the top third highest-income pensioners, but even among this group 42 per cent still said they were unaware.
Just carried out the survey of 1,050 retired and semi-retired over 55s in August.
Inheritance tax is charged at 40 per cent for estates worth more than £325,000, with an extra £175,000 allowance towards a main residence.
A married couple can share their allowance, which offers the ability to pass on £1mn to their children without any tax to pay.
The starting threshold has remained unchanged since 2009 while the additional £175,000, known as the nil rate band, was introduced in 2017 and has not increased since 2021.
Stephen Lowe, group communications director at retirement specialist Just Group, said: “The pincer movement of rising property prices and frozen tax thresholds means that more and more families are getting caught in the inheritance tax trap.
“Anyone planning to pass on an inheritance to their loved ones should make sure they understand if the inheritance tax rules will affect their plans and how to mitigate the impact if they do.
“Homeowners should ensure they have an up to date valuation of their property to check whether recent substantial property price rises have tipped them over the threshold.”
At the moment, thresholds are frozen until at least 2028 as announced in the chancellor's 2022 Autumn Statement.
However, last month reports emerged that prime minister Rishi Sunak is considering a cut to inheritance tax ahead of the next general election.
The Institute for Fiscal Studies found the cost of abolishing IHT would be £7bn, of which 47 per cent would go to the wealthiest 1 per cent - those with estates of £2.1mn or more at death.
tara.o'connor@ft.com
What's your view?
Have your say in the comments section below or email us: ftadviser.newsdesk@ft.com
