Over 2,000 UK residents with investable assets worth at least £250,000 ($319,221) were polled for the most recent Wealth Index report.
28% of those surveyed stated they had no preparations in place to deal with inheritance tax.
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In addition, 8% of these respondents currently lack a strategy in place, but they do have plans for the future.
Furthermore, 4% haven’t given it any attention, and 2% have no intention to make changes to inheritance tax.
As long as inflation continues, the present IHT thresholds will remain in effect until 2028, which implies that an increasing number of people will be subject to the tax.
The average home in the UK was worth £154,066 when it was established in 2009.
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The asset which makes up a large portion of most estates has increased in value by 70% (£107,929), yet because the nil rate band has remained same, millions more households get swept into the IHT net every year.
UK inheritance tax
Estates that exceed the “nil rate band,” which has been fixed at £325,000 for the past 14 years, are subject to inheritance tax at a rate of 40%.
Even if there are a few exclusions, such as leaving your estate to a spouse or charity, the UK still has one of the highest “death tax” rates in the globe.
If you give away your home to your children or grandkids, the dwelling nil rate band adds an additional £175,000 to your threshold.
IHT is only 4% in Italy, 4% in Australia, 0% in Canada, 0% in New Zealand, and 0% in about 20 other nations.
In addition to this, IHT payments totalled £6.1bn in 2021–2022, an increase of £729m (14%), over the year before.
IHT payments reached £6.1bn in 2021-2022, a £729m (14% increase) over the previous year.
Wealth Index on IHT
Based on Saltus’ research, many of the UK’s wealthiest individuals are failing to create plans to pass on their wealth and shield their estates from IHT at a time when a growing number of people must consider the possible ramifications of this tax.
Despite an increase in the number of estates subject to pay inheritance tax and an increase in the amount of inheritance tax paid.
However, there are a number of methods that people can lessen the effect that IHT has on those closest.
Saltus discovered that, of those HNWIs who already have mechanisms in place to pass on their wealth (72%), 64% have already passed it on (28%) or plan to transfer it on (36%) to friends and family as gifts.
Furthermore, 65% have previously purchased (24%) or plan to invest in (41%) a funeral plan.
Six in ten (61%) HNWIs plan to leave money to charity (36%) or have already (25%) made a gift to charitable organisations as part of their estate planning.
Mike Stimpson, partner at Saltus, commented: “It is surprising that a quarter of HNWIs do not have IHT plans in place, as we know that people want to leave as much of their wealth to their loved ones as possible and proper planning can ensure this happens. The years where inheritance tax (IHT) applied only to the UK’s wealthiest are long behind us. Over the last 20 years, we have experienced a boom in UK property, which means many more of us will be impacted by IHT and need to consider which measures to put in place.
“It has been widely reported that the Government held talks about scrapping inheritance tax. Given that Saltus’s latest research shows that over a third (36%) of HNWIs feel that they already pay too much tax, the removal of IHT (if it were to happen) would likely be welcome news to them as well as to the increasing number of people pulled into being subject to this tax. As things stand, inheritance tax can be a significant burden on estates, but there are a variety of tools and strategies available to minimise its impact. By taking the time to consider this as part of a financial planning strategy, people can ensure that their beneficiaries receive the most from their legacy, rather than the government.”
HNWI confidence in the economy steadily restores
The Saltus Wealth Index Report is a biannual study of HNWIs’ perspectives and attitudes towards their own wealth and the wider UK economy, as well as research on the policies in place to address IHT.
The only indicator of HNWI confidence in the UK is the Saltus Wealth Index, which is featured in the report.
Nine questions on participants’ wealth and the overall UK economy are used to calculate the Index, which results in a “confidence” score between 0 and 100.
The Wealth Index is now at 60.9, which is a little improvement over the previous reading of 59.5 from January 2023.
The rise was driven primarily by a 4% increase in respondents’ confidence in the UK economy (71%, up from 67% six months ago), and by the fact that 82% of HNWIs feel more secure about their financial position.
These findings show that, despite recent difficult circumstances like turbulent politics, persistently high inflation, and rising interest rates, HNWIs are feeling optimistic about their future now than they did earlier this year.
