Loved ones lose out on £1.2 billion in unnecessary death duty payments

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Britons are paying over £1.2 billion more in inheritance tax each year than they need to, reveals research* from IFA Promotion, the organisation promoting the benefits of independent financial advice.

The latest research from IFAP’s annual Tax Action campaign show that this year alone more than 265,000 estates will be applying for probate** with assets totalling nearly £42 billion – of this £2.4 billion will go to the taxman, £1.2 billion of which could have been avoided.  Contributing substantially to the sum are the 63,646 people who have died ‘intestate’ with estates that require a grant of probate having made no provision for the division of their estates among family, friends or favourite charities.  In many cases this means that those closest to the deceased person may receive nothing – worse still, if the state cannot trace anyone to inherit the estate, it all goes to the taxman.  

David Elms, Chief Executive at IFA Promotion, commented, “Our research shows that more financial planning is needed to avoid the inheritance tax trap. This includes making a will to distribute your estate tax-efficiently as there is a further form of tax on death, which applies when individuals have not made a will. Unfortunately, we have also found that two thirds of all adults have not made a will at all, which is quite worrying for all relatives and dependents.”

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* Tax Action 2004 conducted by independent research agency, RAKM, for IFA Promotion

** Usually those holding assets of more than £5,000 in a bank or building society, stocks and shares, property or land

Elms continued, “Inheritance planning is no longer just for the rich. With soaring property values more people than ever will find that their assets now exceed the £263,000 threshold for inheritance tax.  It is imperative that you make sure that all your assets go to the people that you want them to go to, rather than the straight to the taxman. Even if there are no relatives, charities can benefit from your assets as charitable donations attract no tax.”

There are a number of ways to beat inheritance tax and an independent financial adviser can explain which ones would apply to you.  For example:

-          Inheritance by a spouse is not subject to IHT.

-          Anyone can give away £3,000 to an individual each year without it being added back to the value of the estate on death, as well as £250 to any number of people.

-          Wedding gifts are also allowable to a certain limit if there is a relationship to one of the couple.

-          Gifts of any size are potentially exempt if the donor survives for seven years or more.

Elms concluded, “An independent financial adviser can help you plan your inheritance, enabling you to leave more of your estate to your preferred heirs.”

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For expert comment or case studies from over 200 media-friendly IFAs, journalists should call IFA Promotion’s Media Services hotline on 020 7294 3682 or search online in ‘Media Services’ at www.unbiased.co.uk

1.  Independent Financial Adviser Promotion

IFA Promotion was established in 1989 to promote the value and accessibility of independent financial advice to the public.  It represents over 10,000 firms of independent financial advisers across the UK and is sponsored by 27 leading financial institutions. In 2003, over 330,000 consumers and businesses used IFA Promotion to find local independent financial advice.

IFA Promotion believes Independent financial advice should be:

·        Affordable.  The option to take independent financial advice should be available, by right, to all - not just the wealthiest in society.

·        Convenient.  IFAs should be available in the location of the consumer’s choice, wherever they live in the UK.

·        Transparent.  It must be clearly transparent to consumers who is able to offer independent financial advice and who is not.

2.      Independent Financial Adviser Promotion’s sponsors

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