Take the IHT quiz
A survey by HMRC published in May 2019 concluded that the public have a relatively poor knowledge of inheritance tax (IHT) rules and lack of confidence in what they do know. The survey was taken by 947 people who had made gifts in the last two years. To assess knowledge of the IHT system among these donors, they were asked eight questions.
You can answer them too, to test your own knowledge (the answers are at the bottom of the page):
- A donation to a charity or a qualifying political party can count as a gift
that is exempt from inheritance tax
- Inheritance tax may be paid on gifts totalling more than £325,000 if
the person who makes the gifts dies within seven years of making them
- A person can give as many gifts of £250 as they want in a year and not be
subject to inheritance tax, as long as each gift is to a different person
- Inheritance tax may be charged at 40% on gifts to individuals given by
the deceased in the three years before their death
- A gift can be the difference between the value of property and the actual
price that the buyer pays
- Inheritance tax will always be payable on gifts over £3,000 given in the
seven years before death
- A gift up to £1,500 to a niece or nephew getting married is always tax free
- A married couple or civil partners can leave up to £950,000 to their
children without paying inheritance tax
58% answered five or more questions correctly, while just 37% gave themselves a confidence rating of over 6 out of 10 on answering the questions. After adjusting for confidence levels, the survey concluded that the proportion with a “high knowledge” – as opposed to simply lucky with their answers – was just one in four.
Most over-50s are unaware of the key facts
Alan Boswell Group carried out its own research in 2018, and the findings were similar. John Whitehead, MD of Alan Boswell Financial Planing, said at the time –
Inheritance Tax is affecting more people than ever before, and it is concerning to find that the majority of over-50s, who will be most affected by the trend, are unaware of the key facts. As a result, they are likely to pass on less to their heirs than they were expecting.
You can read the rest of our findings here.
Whatever your score, it is worth considering why HMRC should have undertaken such a survey at this time. It may be no coincidence that the Office of Tax Simplification is due to publish its second report on IHT simplification soon. Rationalising the rules on lifetime gifts is an obvious target, but as ever with simplification, there would be some losers. We can help you consider where you might stand on the wining and losing scale.
The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.
Answers: all statements are true except 6 & 7.