Almost a third of over-55s have never checked how Inheritance Tax could affect them

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A new study by TIME Investments, a provider of Inheritance Tax services, shows nearly one in three (31 per cent) over-55s have never checked how Inheritance Tax (IHT) could affect them despite 36 per cent estimating their estates are worth more than the current tax-free allowances.

IHT receipts received by HMRC during the tax year 2020/2021 were GBP5.4 billion, an increase of 4 per cent (GBP190 million) on the tax year 2019/2020, according to Government figures. 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 GBP985 million in the next five years. 

However, TIME Investments’ nationwide study shows more than half (52 per cent) of over-55s do not know what their IHT liability could be.  A prudent 25 per cent say they are aware of their potential liability while another 23 per cent are confident they won’t have any IHT to pay. 

The research revealed that 36 per cent of over-55s estimate their estate would be worth more than GBP325,000 – the current nil-rate band – and 20 per cent estimate that the value is worth more than GBP500,000 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 per cent of over-55s say their house is worth more than GBP325,000 compared to 24 per cent of the population as a whole. 

Perhaps of most concern, around 28 per cent 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 says: “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.


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