Inheritance tax warning as millions risk huge bill after ‘misunderstandings’

Millions of over 55s are at risk of leaving families with what could be a significant tax bill to be paid.

Research from financial planning experts at abrdn found that a third (32 percent) of UK adults over the age of 55 (16.4 million people) are unaware of whether or not their families could be left to pay a tax bill when they pass away.

However, on average, individuals estimated they would have a total of £354,000 in assets – which is above the inheritance tax threshold of £325,000 – which is double for married couples. In London, the average estimation jumped to £556,999.

Millions of Britons are warned “uncertainty and confusion” can leave them paying thousands in IHT, but with forward planning, they may be able to reduce their bill.

A further three in ten (29 percent) over 55s don’t think their wealth is large enough to need advice on inheritance tax – despite the average individual having assets above the threshold.


This comes as HMRC reports a 24 percent increase in the number of people paying IHT in 2022-23 – with the latest figures showing receipts of £1.2billion – £100million higher than the same period in 2022.

Shona Lowe, Financial Planning Expert at abrdn, said: “Inheritance tax is no longer the ‘wealth tax’ it once was. Thanks to years of soaring property prices across the country, alongside the freeze of the ‘nil-rate’ band until at least 2028, more people are likely to be liable.

“The confusion is putting millions at risk of being hit with an unexpected, and potentially considerable, tax bill after the death of a loved one.

“Misunderstandings around inheritance tax rules was found to be a factor preventing people from seeking support around planning, whether from friends, family or a professional financial adviser.”

Whether that’s using gift allowances which allow an individual to pass on money to loved ones, establishing a trust or making use of business relief the ‘right’ way depends entirely on your individual circumstances.

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Some gifts are exempt, which means the value of them leaves your estate immediately. That could be because they fall under the ‘annual exempt amount’, which allows people to gift up to £3,000 each year split between as many recipients as they like.

Or it could be because they fall under the ‘small gift exemption’, which allows you to make as many gifts of up to £250 as you choose in a year, as long as each one goes to a different person.

“If you don’t have a will, it will be payable by the person appointed to administer your estate, again from the estate itself.”

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