Younger people who are likely to rely on inheritance to purchase their first home are more afraid of paying inheritance tax than older generations, new research has shown.
According to a study by insurer NFU Mutual, more than a quarter (27%) of people in the UK are scared of paying inheritance tax, with those aged between 18 and 24 more afraid than any other age group.
Sean McCann, chartered financial planner at NFU Mutual, said: “Younger people are becoming increasingly reliant on inheritance or cash from parents and grandparents to get on the property ladder so it’s not surprising they fear a tax that could affect those plans.
“An increasing number of families are recognising the rising threat of inheritance tax and using pensions which are normally free from inheritance tax and other gifting strategies to pass wealth down the generations tax free.”
The research found that overall, only 18% of people in Great Britain think inheritance tax is fair, while 57% deemed it unfair and a quarter (25%) were unsure.
Inheritance tax is currently charged at 40% on assets including cash and property left on death. Individuals have a £325,000 tax-free allowance, plus up to an additional £175,000 on the value of their home if left to a ‘direct descendent.’ However, nearly three times as many Britons think the tax-free allowances are too low than those who think they’re too high, NFU Mutual said.
McCann added: “Inheritance tax is one of the most unpopular taxes and the numbers paying it are steadily rising as are the size of the tax bills families are facing. The £325,000 tax free allowance hasn’t changed for thirteen years and is set to remain frozen until 2026.
“Although most can leave up to an additional £175,000 of the value of their home to a ‘direct descendant’ not everyone is able to take advantage of it. Those without children miss out completely and those whose estates exceed £2m can lose some or all of this extra tax-free benefit.
“As house prices and other asset values continue to rise, more families will have to pay the tax. The good news is there are a number of ways of reducing inheritance tax. A good financial adviser will be able to explain the options available.”
[Main image: john-schnobrich-unsplash]
