There were some other interesting findings that fell out of the survey:
- 55% of respondents did not know the rate of IHT (40%) on death;
- 38% did not think their main home was liable for inheritance tax;
- only 32% know the annual exemption amount they are entitled to (£3,000); and
- only 40% of those surveyed were aware that vehicles, life insurance policies not held under trust, agricultural land, business assets and non-exempt gifts in the last seven years can be liable for IHT as part of an estate on death.
Having looked at the survey, I personally find the lack of knowledge it reveals is very worrying. It means that there are a lot of people out there who will not be taking advantage of the available reliefs, or worse blindly entering into a transaction that actually worsens their tax position!
H M Revenue & Customs latest figures show receipts from IHT have hit a record high, payments totaling £4.84bn in the 2016/17 tax year. For reference in 2009/10 IHT receipts were a mere £2.4bn. Whilst some of that growth has clearly been driven by house prices since the 2007/08 crash, particularly in the South East, one can't help but wonder if in part it is due to the lack of knowledge highlighted by Canada Life's research. (Personally, I also think the witchhunt on "tax avoidance" has made a lot of people nervous about doing any kind of tax planning whatsoever)
It is, however, worth pointing out that last month the government announced plans to review the ‘complex’ IHT system in the UK, tasking the Office of Tax Simplification (OTS) to make recommendations about possible reforms. Although, having been a tax adviser for as long as I have I remain skeptical about the OTS actually making any headway with simplifying the IHT code...
