Lack of IHT planning despite ‘Jenga tower’ of rules to overcome
28 March 2019
The majority of UK adults are not seeking advice on how to pass their wealth to the next generation, despite inheritance tax receipts hitting a record high of £5.2 billion in 2018 and a system that has become increasingly complicated to navigate.
Nearly two-thirds (63%) of UK adults have not sought any information or advice on how to transfer their wealth to their loved ones, according to research by Quilter. Only 15% of respondents said they had sought information or advice on both transferring their wealth whilst still living and also at death.
HMRC figures showed an 8% increase in inheritance tax bills last year, however, over a third of those surveyed (35%) who have not sought advice admitted this was something they had never considered. More than one fifth (22%) said they did not feel they needed the information and advice, whilst 20% said they did not have enough assets to justify the cost of advice.
The research also found that nearly three quarters (73%) of respondents do not have a wealth transfer or inheritance plan in place, while 40% have not discussed plans to pass on wealth to family members who will benefit. A similar proportion (41%) said they had discussed their plans, but not in great detail.
Pamela Reid, client services director at Quilter Cheviot, said that while inheriting is assumed to be completely normal, the research shows it remains something that is not openly discussed and in many cases, not planned for.
She said: “It is never too early to start planning, and these findings should encourage financial advisers to open discussions with their clients wherever possible; addressing common misconceptions and concerns and encouraging them to be as transparent with their next of kin earlier.”
Rachael Griffin, tax and financial planning expert at Quilter, commented: “The inheritance tax system has layers and layers of complication which have created a Jenga tower on the verge of toppling over. The technical nuances mean you have to be heavily versed in rules of inheritance tax to know the best way to pass wealth on to the next generations.”
Griffin said the decision by the Office of Tax Simplification to review inheritance tax will “hopefully remove these complications” and said one simple change could be bringing allowances up to date.
She added: “The annual IHT gifting allowance has remained at £3,000 since 1981. Had the annual allowance tracked inflation, it would’ve been permissible to gift £11,296 per tax year in 2018, according to the Bank of England inflation tracker.”
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