Londoners still in the dark over inheritance tax
OVER two-thirds of affluent Londoners are ignorant about inheritance tax, despite being the group most likely to be hit by the tax, a new study out yesterday shows.
The current tax threshold, which is set at £325,000 for this tax year, was correctly identified by just 38 per cent of well-heeled respondents polled in London. The national average was 47 per cent, according to the study by Close Brothers Asset Management.
The inheritance tax threshold means that people who are left over £325,000 in inheritance are taxed on the assets at the 40 per cent rate. If less than £325,000 is left, there is no tax pay.
Affluent Londoners are the most likely to pay inheritance tax because they are the wealthiest group, with an average of £1.3m in assets.
Now, with rising property prices in the capital, more Londoners than ever before are set to be hit by inheritance tax in the coming years.
Grant Thornton predicts that nationally 42,000 people will be hit by the tax by 2016-17, more than double the 21,000 people who are affected today.
“When it comes to personal finances, those looking to pass on their wealth cannot let inheritance fall under the radar. It can only be ignored for so long,” Patrick Haines, regional head of advice at Close Brothers Asset Management, said.
Recent figures from the Office for National Statistics suggest Britons inherit £37bn every year, mostly from deceased parents, while 76 per cent of inherited wealth goes to just a quarter of the population.
Further statistics from the study suggest most people polled had failed to put a plan in place to deal with the tax threshold. More than a third (34 per cent) said they had not no plans to protect their assets from the 40 per cent tax rate, while a further 32 per cent did not believe they had to act to protect their assets.
“A combination of planning inertia and a general lack of awareness is to blame, but it is crucial that those who will see their estates subject to the tax understand their liability,” Haines added.