Article by Phil
As the amount collected through Inheritance Tax increases better inheritance tax planning advice is needed.
One of the Inheritance Tax (IHT) issues which is not often considered is the tax due on gifts given within seven years of the donor dying. According to Evelyn Partners research, the number paying tax on gifts increased by 150% last year. With the average tax charge nearly £200,000 which is a big, unexpected bill. In order to calculate the amount of IHT due, the value of the gifts made is first taken off the overall Inheritance Tax free allowance which is currently £325,000. After the annual gift allowance of £3,000 has been taken into account. Whilst IHT on gifts only tends to come into play where there have been substantial gifts made, these can add up over a seven-year period. Especially as more and more people are making gifts to help first time buyers get on the property ladder. It pays to take Inheritance Tax planning advice.
Probate improvements
Some good news though. The number of applications for probate has reduced from 32,000 to 22,000 in the last 12 months. That has led to the average time to process a probate application falling from an average of 14 weeks to just over 9 weeks. But remember that is an average, some will be slower and some quicker of course. Some of this is down to improvements in online applications.
Just as well, because the numbers paying IHT is only going to increase. According to Barclays an incredible £460 billion is being held in cash deposit accounts in the UK at any one time. But why isn’t this money being invested? Barclays suggest that it is down to a combination of factors including:
- 43% thinking investing is too risky for them.
- 21% saying that they didn’t know enough to invest.
- 24% of people thought it would be too complicated.
St James Place conducted a similar survey, and they found that the reasons people didn’t use advisers included:
- Thinking they didn’t need it.
- Didn’t know what the benefits of inheritance tax planning advice were.
- Thinking it was too early to take inheritance tax planning advice, or
- It was too late to do anything about it.
Lost pensions
There may well be more IHT to pay on lost pension pots as well. According to Standard Life one in five people may have lost track of one of their pensions. With the average worker in the UK now having an average of 11 jobs in their working life, losing track is very easy. 75% of people say that they never consolidated their pensions when they changed jobs. It is estimated that over £26 billion is unclaimed in dormant pension funds.
You should consider this, especially when My Pension Expert has found that:
- Over half of people say that they find pensions confusing.
- Almost half of people don’t think about their retirement plans because it causes them stress.
- Well over half say they can’t save for retirement because of the day-to-day pressures of the cost of living.
- Only a third of people are confident that they have enough money to retire.
It’s worth writing to all your previous employers to ask about their pension arrangements if you think that you’ve lost a pension. Or you can try the government’s own service.
