Recent research by Unbiased.co.uk has revealed that UK taxpayers will waste nearly £1.3 billion this year due to poor inheritance tax (IHT) planning. This tax wastage is only set to increase further in the future after the chancellor announced in 2010 that the threshold would remain frozen for four years at £325,000 rather than rising in line with inflation.
Inheritance tax is not only Britain’s second biggest tax wastage area but it also holds the fifth place in the list of taxes Britons most want to abolish (after fuel duty, council tax, TV licence fee and income tax). Despite this, almost nine out of ten people state they have done nothing in the past twelve months to reduce the amount of tax they pay.
Unbiased.co.uk also found that more than a quarter of people do not know how to go about being more tax efficient. One of the biggest and most widespread causes of ‘death tax’ wastage is inclusion of proceeds of life assurance policies in personal estates which, if written in trust, would not be subject to IHT. Unbiased.co.uk stress the importance of inheritance tax planning when making wills to prevent vast amounts going unnecessarily to the taxman.
