HMRC reveals lack of understanding around inheritance tax gifts

29 May 2019

sailing boats docked at the shore

Research published by HM Revenue & Customs (HMRC) on 17 May 2019 has found that half of people gifting either money or assets were not clued up on the rules and exemptions around inheritance tax.

Of the 2,090 individuals surveyed, only 45% were aware of the tax implications around making gifts. Older, wealthier people with a likely larger exposure to inheritance tax were better informed in general.

Martyn Dobinson, a partner and member of Saffery Champness’ Land & Rural Group comments:

“Inheritance tax is a complex area and the research by HMRC shows just how scant the level of understanding about it is. Charged at 40% on death, once the standard nil rate band and any other available inheritance tax reliefs are exceeded, clearly this can present a significant hit to the value to be passed down to the next generation.

“A steady increase in property values has led to a greater number of people paying inheritance tax on their estate, although this has been mitigated in part by the main residence nil rate band, which is relevant where the deceased leaves a residential property that was their main residence, at some point, to a direct descendant. The main residence nil rate band increases to £175,000 from 6 April 2020 from the current level of £150,000.

“The rural sector is fortunate in that, currently, Agricultural Property Relief (APR) and Business Property Relief (BPR) could be available for certain assets. Careful planning is essential to ensure that the inheritance tax position of the farm or estate business is not jeopardised.”

Find out more about inheritance tax rules and exemptions, including lifetime gifts, gifts to spouses and civil partners, gifts out of surplus income and exempt gifts.