Fewer than half of people that are giving assets or large sums of money through inheritance understand Inheritance Tax (IHT) rules, according to research by HM Revenue & Customs (HMRC).
HMRC conducted a survey of 2,090 people, trying to ascertain their understanding of IHT and information about gifting behaviour. In total, the survey found that 45 per cent were aware of the rules and regulations concerning their gifts.
However, the research found that older people who intended to leave a larger estate had a better knowledge of IHT. HMRC noted that these individuals were more likely to be affected by Inheritance Tax rules generally, and specifically when giving a gift.
Knowledge of the rules surrounding IHT, including exemptions, was found to be low among those who were making gifts, while conversely, of those who did have knowledge of the rules, relatively few people were affected by them.
In the current system, gifts of a value of lower than £250, to a total of £3,000 per year, are exempt from Inheritance Tax.
IHT is paid at 40 per cent on an inherited estate above the £325,000 threshold. But, there are some exemptions. For example, if the beneficiary of an estate is the spouse or civil partner or the deceased, there is no tax to pay. In addition, if a home is given to their children or grandchildren, then the £325,000 threshold becomes £450,000.
76 per cent of people giving gifts donated money, making it the most common form of inheritance. HMRC reported that 40 per cent of those aged 18 to 29 gifted property, compared to seven per cent of people age 70 and over.
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