Over half of UK retirees ‘unaware’ about IHT thresholds

Britons are being advised to familiarise themselves with inheritance tax (IHT) regulations as an increasing number of families find themselves subject to this tax.

This cautionary note arises from recent research revealing that 59% of retirees are unaware of the inheritance tax threshold for estate valuation.

A survey conducted by Just Group among 1,050 UK individuals aged 55 and over, who are either retired or semi-retired, indicated that 51% of respondents were not informed about the threshold, while an additional eight percent expressed uncertainty. While awareness among the highest-income pensioners in the top third of the study was marginally better, with 42% admitting ignorance of the thresholds, a significant knowledge gap persists.

What’s more, half of the respondents (50%) admitted to lacking a clear understanding of both the inheritance tax rules and the permissible amount that can be transferred before incurring taxes. This awareness is crucial given Her Majesty’s Revenue and Customs (HMRC) projections that a growing number of estates will fall within the inheritance tax purview in the coming years.

In November of the previous year, the government estimated that an additional 13,400 estates would become subject to IHT between 2021 and 2028 due to frozen starting thresholds. This estimate was later revised to 49,400 in the Spring Budget of the current year. This underscores the importance of individuals comprehending the intricacies of inheritance tax regulations to navigate potential tax liabilities. Stephen Lowe, group communications director at retirement specialist Just Group, said:

“The pincer movement of rising property prices and frozen tax thresholds means that more and more families are getting caught in the inheritance tax trap. Anyone planning to pass on an inheritance to their loved ones should make sure they understand if the inheritance tax rules will affect their plans and how to mitigate the impact if they do.

Homeowners should ensure they have an up-to-date valuation of their property to check whether recent substantial property price rises have tipped them over the threshold. Professional, regulated advice can also help people work out the total value of their estate, calculate how much inheritance tax those inheriting the estate may be likely to owe and understand what options they have to minimise a future tax bill.”

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