Half of consumers have no idea how much Inheritance Tax (IHT) they could be liable for on death and only a quarter really understand IHT completely according to a survey by Charles Stanley.
The wealth management firm conducted a survey of 3000 consumers, aged over 18 and with above average pre-tax salary of £33,000 and at least £1,000 in accessible cash/savings. It found widespread misunderstanding of IHT and a need for greater consumer awareness. Concerningly, the result indicate a ‘misplaced confidence’ amongst consumers with 80% claiming they know how IHT works.
When asked, only half (52%) of consumers say they know how much IHT will be payable on their estate in the event of their death, while a similar number (48%) have no idea how much tax would have to be paid for theirs. Two in five of those with estates valued more than £750,000 do not know how much IHT will be payable on their estate.
Of those who have an estate under the value of £100,000, 42% think there will be IHT payable after their passing, with a mean estimate of more than £35,000 to be paid in tax – even though this sits well under the £325,000 threshold. The same goes for consumers with an estate between the value of £100,000 and £325,000, with 55% thinking there will be some amount payable in the event of their death, with figures averaging more than £48,000 based on their predications.
Even of those who have estates with an active IHT liability – true of two thirds (39%) of those surveyed – many are miscalculating what their bill will be. Of those with an estate valued between £325,001 and £750,000, 48% say they have no idea how much will be payable on their estate if they were to pass away, compared to 52% who do know. The average they think will be payable is £56k; a figure the firm describes as ‘staggering’.
Awareness does rise with the value of the estate, with three-fifths (61%) of those with estates valued more than £750,000 knowing what tax will be payable in the event of their death. However, two in five (39%) still have no idea how much will be payable if they were to pass, though consumers think an average of £77k will be paid out in IHT.
“While passing down an estate can be a great tool to building generational wealth, giving loved ones a chance to reap the fruits of your labour, a lack of understanding or knowledge around the IHT payable could catch them off guard, shouldering a large sum to pay which may result in the unnecessarily swift liquidation of assets or property sales.”
“This is why estate planning is a critical aspect of wealth management – allowing you to make the most of your estate and finances, whether this is through gifting or donating in preparation, or even just keeping beneficiaries in the know to avoid any unpleasant surprises down the road in your absence.”
said Rob Morgan, Chief Investment Analyst at Charles Stanley, on the results of the survey.
