Recent data suggets that the confusing nature of inheritance tax (IHT) is having a negative impact on the wealth shared with younger generations.
Research from Brewin Dolphin suggests that the tax is bewildering for the older generation, with the amount they believe they can gift before it is subject to IHT standing at £1,575 on average; almost half of the actual £3,000 allowance.
Of those survyed, just under half (44%) of parents stated that if there were no tax implications, they would give more money to their offspring, whilst this was the case for just over a third (35%) of grandparents.
The results of the survey follow an announcement from the government that a review, undertaken by the Office of Tax Simplification, will soon be conducted on IHT .
Commenting on the research was Liz Alley. The head of financial planning operations at Brewin Dolphin stated: ‘Inheritance tax can be incredibly confusing, so it’s not surprising to hear that many people are unsure how much they can gift each year. It is music to my ears that the Chancellor recently wrote to the Office of Tax Simplification for a review of inheritance tax to ensure the system is “fit for purpose”. It’s clear from our research and from speaking to our clients that the system needs looking at.
She then went on to highlight the need for an increase in the yearly gifting allowance, stating that it could benefit both the older and younger generation.
‘However, we’d also like to see the annual gifting allowance increased. It has remained at £3,000 a year since the early 1980s and we believe that if this was increased we would see more families pass wealth down through the generations. Not only will this give younger people the financial leg up in life that so many need, but it would also help older generations from an inheritance tax perspective.’
