Britons Waste More Than A Billion On Poor IHT Planning

by Robert Lee, Tax-News.com, London

01 November 2006

New research has shown that the standard of inheritance tax planning in the United Kingdom has improved compared with last year, although Britons are still expected to waste about GBP1.3 billion (US$2.5 billion) on poor IHT planning in 2006.

According to an annual report by Unbiased.co.uk, a website which promotes the benefits of independent financial advice, this figure represents a drop of almost GBP300 million compared with 2005, demonstrating that homeowners are becoming more aware of the merits of effective IHT planning.

However, the report warns that this trend could be short-lived, as house prices continue to rise at a much faster pace than the IHT threshold.

The most widespread cause of IHT tax wastage is the inclusion in personal estates of the proceeds of life assurance policies, which if written in trust would not be subject to inheritance tax. These errors are estimated by unbiased.co.uk as accounting for GBP119 million in erroneous tax wastage.

However, far more tax waste results from a simple lack of inheritance tax planning within personal estates. This waste has been quantified at almost GBP1.2 billion this year alone.

Commenting on the findings, David Elms, Chief Executive of unbiased.co.uk, noted that: “Our research shows that although people are improving their inheritance tax planning, they still have some way to go. Property prices have outstripped the IHT threshold over the last few years and inheritance tax is now a very real concern for most UK homeowners."

"It’s vital that people seek advice from an independent financial adviser, so they can make informed decisions when it comes to IHT planning," he added.

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