Inheritance tax rules remain a source of confusion for the over-55s, says Just Group, as rising property prices and frozen tax thresholds force more people into the net.
Nearly three fifths (59%) of retired and semi-retired over 55s said they did not know the IHT threshold for the value of an estate, according to the group’s Countdown to Retirement report.
The starting threshold for IHT has remained unchanged since 2009 at £325,00, while the residence Nil Rate Band, introduced in 2017, is currently £175,000 and has not increased since 2020-21. Both bands are set to remain frozen until April 2028, under new tax freezes announced by Chancellor Jeremy Hunt in 2022.
At the same time, the average UK property price has risen 30% in the past five years, jumping from £218,642 in April 2017 to £283,871 in April 2023.
Despite a growing number of individuals being affected by IHT, with the government expecting a further 13,400 estates to be liable for the tax by 2028, 50% of retirees said they did not have a clear understanding of the rules and the amount that can be passed on before tax. While awareness of thresholds was slightly stronger among the top third highest-income pensioners, 42% of this cohort also admitted they did not know what the thresholds are.
Stephen Lowe, group communications director at Just Group, urged homeowners to get their property valued to understand whether they will be caught in the IHT net.
Lowe 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 one 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.”
Main image: annie-spratt-OousVlBRHbQ-unsplash
