Inheritance Tax Is No Longer Just a Problem for the Wealthy
New research suggests that delays in estate planning could cost UK families billions of pounds in avoidable inheritance tax over the coming years.
The report points to a combination of frozen allowances, rising property values and forthcoming pension changes that will bring increasing numbers of families into the inheritance tax net.
Perhaps the most interesting finding is not the amount of tax itself, but the reason behind it.
The report concludes that the greatest cost often comes from delay.
Families know they should plan.
They intend to plan.
But life gets busy, conversations get postponed, and before long the opportunity to use many of the available planning options has been significantly reduced.
The reality is that inheritance tax is no longer solely an issue for the traditionally wealthy.
Across the country we are seeing ordinary families whose estates have grown steadily over many years through:
Property appreciation;
Pension accumulation;
Business ownership;
Long-term saving and investment;
Inheritance from previous generations.
Many of these individuals do not consider themselves wealthy at all.
Yet increasingly they are finding themselves exposed to inheritance tax simply because asset values have risen while tax thresholds have remained largely unchanged.
The good news is that effective inheritance tax planning does not necessarily require complex structures, aggressive tax strategies or exotic investments.
In many cases, the most successful planning is the simplest.
It is about understanding the allowances that Parliament has deliberately made available and ensuring they are used proactively and in good time.
Unfortunately, time is often the one asset families cannot recover.
As James Berkeley, Senior Counsel at iTrust121, explains:
"One of the biggest misconceptions we encounter is that inheritance tax planning is only relevant to the very wealthy or that it requires complicated tax schemes to be effective.
In reality, many of the families we speak to are not large business owners or high-net-worth investors. They are ordinary families who have accumulated wealth over time through property growth, pensions and sensible saving.
Good inheritance tax planning is rarely about finding loopholes. More often, it is about understanding and using the allowances that HMRC already provides and doing so proactively during lifetime planning rather than reactively following illness or later-life events.
The most effective plans are usually those that start early, evolve over time and are reviewed regularly as circumstances change. The families that benefit most are often not those with the most wealth, but those who simply started the conversation sooner.
Inheritance tax planning should not be viewed as a tax exercise. It is ultimately about ensuring that more of what families have worked hard to build reaches the people they intended to benefit."
James Berkeley
Senior Counsel
iTrust121