Three in five (59%) UK adults are confused by inheritance tax rules, according to new research from Canada Life.
With frozen thresholds and recent policy changes set to pull more families into the inheritance tax net, just 6% of those surveyed describe their understanding of the rules as very clear.
Additionally, only one in six (16%) Brits feel confident about how much they can gift each year without it being counted for inheritance tax purposes. The majority (47%) have either heard of certain gifting allowances and exemptions but do not know the details or simply don’t know anything about it, whilst 10% believe all gifts sit outside of inheritance tax calculations.
Only a quarter (26%) of UK adults could correctly identify the annual tax-free gift allowance as £3,000, while the remaining 74% either chose the wrong amount or said they don’t know.
Furthermore, more than half (57%) are either not aware of the seven-year rule or do not know how it works, more than double the 27% who say they fully understand the rules.
John Chew, tax, trusts and estate planning expert at Canada Life, said: “With rising property values, IHT thresholds frozen until 2031 and pensions set to be included in inheritance tax calculations from April 2027, an increasing number of families who never expected to pay inheritance tax may now need to review their financial planning strategies.
“Confusion around inheritance tax can have real consequences: families risk missing valuable reliefs and exemptions or face delays and additional stress at an already difficult time.
“As we embark on a new tax year, now is a good time to take stock of your estate and assess your inheritance tax position. The earlier families start to plan, the more scope they have to use allowances and exemptions, make gifts in a tax efficient way, and structure their affairs so that more of their wealth goes to loved ones.”
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