Why more people need to think about IHT (even if you think you don’t)

Inheritance Tax (IHT) is one of those things most people assume won’t affect them.

In reality, more and more families are getting caught by it, often without realising until it’s too late to do much about it.

Recent research shared by Professional Paraplanner found that most UK adults don’t fully understand how IHT works. That’s not surprising, it’s not exactly straightforward, and it’s not something people tend to look at until they feel they need to.

The problem is, by that point, you can already be on the back foot.

 

Why this is becoming more of an issue

A few things have changed over the years that mean IHT is creeping into more estates:

• Thresholds have been frozen for a while

• Property prices have increased

• Pensions are expected to be brought into IHT from 2027

So even if this wasn’t something you needed to worry about before, it’s worth revisiting as things might look very different now.

 

Where people tend to get caught out

The same research (via Professional Paraplanner) highlighted a few common gaps:

• Lots of people don’t realise they can gift £3,000 each year

• The “7-year rule” isn’t widely understood

• Very few people feel confident they understand how IHT works

What that tends to mean in practice is that simple planning opportunities get missed. Not because people are doing anything wrong, just because no one’s ever properly talked it through with them.

It’s not just for “wealthy” families

This is probably the biggest misconception.

With house prices where they are, and thresholds staying the same, IHT isn’t just a “high net worth” issue anymore. A lot of typical families could be affected, particularly if you own your home and have built up savings over time.

 

A quick sense check

If you’re not sure whether IHT could apply to you, it’s worth asking yourself:

• Do you know roughly what your estate is worth?

• When did you last look at it properly?

• Do you know what would happen from a tax point of view if something happened to you?

If the answer’s “not really”, you’re definitely not alone. But it’s probably a sign it’s worth having a conversation with an adviser.

 

Final Thought

If you’d like to talk things through, feel free to get in touch with one of our experienced advisers. A quick conversation now can make things a lot clearer and, in some cases, help reduce a future tax bill.