A new study by TIME Investments, a leading provider of Inheritance Tax services, shows nearly one in three (31%) over-55s have never checked how Inheritance Tax (IHT) could affect them despite 36% estimating their estates are worth more than the current tax-free allowances.[i]
IHT receipts received by HMRC during the tax year 2020/2021 were £5.4 billion, an increase of 4% (£190 million) on the tax year 2019/2020, according to Government figures.[ii] Furthermore, the recent Budget decision to freeze both the nil-rate and residence nil-rate bands until April 2026 is estimated to raise an additional £985 million in the next five years.[iii]
However, TIME Investments’ nationwide study shows more than half (52%) of over-55s do not know what their IHT liability could be. A prudent 25% say they are aware of their potential liability while another 23% are confident they won’t have any IHT to pay.
The research revealed that 36% of over-55s estimate their estate would be worth more than £325,000 – the current nil-rate band – and 20% estimate that the value is worth more than £500,000 which is the current allowance with the residence nil-rate band.
Property wealth is the biggest contributor of the overall estate, the research found. Around 31% of over-55s say their house is worth more than £325,000 compared to 24% of the population as a whole.
Perhaps of most concern, around 28% of over-55s say they don’t even have a will in place. One of the first steps in IHT planning should be to establish a will to make sure that clients can choose who inherits their assets.
Commenting on the study, Henny Dovland, TIME Investments’ IHT technical specialist said:
“Many over-55s will have estates worth more than the current IHT allowances and it is a good first step to check what impact IHT could have. The Budget freeze on IHT allowances until 2026 will inevitably mean more people are likely to face tax bills and it makes sense to start planning as soon as possible.”
TIME Investments has created a simple online calculator to forecast a client’s potential future IHT liability. The calculator can be a great tool to open up conversations with clients about later life planning and establish whether they currently have an IHT liability or could have one in the future.
TIME’s IHT calculator factors in the current values and projected growth rates of a client’s property, investments and cash. You can then select the available nil-rate band and residence nil-rate band allowances, which have been updated to reflect the current freeze.
Once you have established whether your client has an IHT liability, you can choose to show the potential tax savings that a Business Relief investment could offer after just two years.
To try the IHT calculator for yourself please visit ihtcalculator.com.
[i] Research conducted by independent market research company Consumer Intelligence among 1,019 UK adults aged 18-plus between February 19th and 22nd 2021
[ii] ‘Inheritance tax statistics: Table 12.1 – analysis of receipts’, July 2021 https://www.gov.uk/government/statistics/inheritance-tax-statistics-table-121-analysis-of-receipts
[iii] ‘Budget 2021: Policy costings’, March 2021 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/965777/Budget_2021_policy_costings_.pdf
The levels and bases of, and reliefs from, taxation may change in the future. Any favourable tax treatment, such as Business Relief, is subject to government legislation and as such may change.
Posted: 09/08/2021 Categories: Inheritance Tax, News, Press