When it comes to financial planning, experts have warned about key document which is often neglected that could help cut one’s inheritance tax bill down.
Grieving families are set to pay £15billion in inheritance tax bills by 2032-33, up from £7bilion in 2024-25, according to the Institute for Fiscal Studies (IFS).
Many people do not think about writing a Will until later in life, however, those with children and grandchildren should do this as soon as possible as it could save them thousands.
If someone does not make a Will, then their estate will be distributed according to the rules of intestacy and may be liable to inheritance tax (IHT) that could otherwise be avoided.
Over half of UK adults (51 per cent) have not written a Will, nor are they currently in the process of writing one, according to research from Canada Life. This includes 13 per cent of people who state they have no intention to write a Will in the future.
Although it may seem important to do so, Britons are warned neglecting this document could cost them heavily in the future.
Those who already have donations to charity written in their will should explore increasing the size of the gift
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Andrea Rozario, chief corporate officer at Bower Home Finance said “You’d be surprised how many people neglect to make a Will.
“If your wishes aren’t written down in legally binding document, this can complicate the inheritance process and even result in a higher tax payment.
“A lot of people make the crucial mistake of overlooking the implications of not having one. If you want to pass your property down to your children or grandchildren with minimal fuss, trusts and wills are the way to go.
“These documents can include specific provisions to help minimise tax liabilities.
“By incorporating tax-efficient strategies into your estate planning, you can safeguard your assets for future generations while minimising the tax burden.”
Britons paid a record £6billion on inheritance tax (IHT) during the 2021/22 financial year, as more families were dragged into paying the levy.
This is the highest proportion since 2016/17.
In the 2021/22 tax year, 4.39 per cent of deaths in the UK met the £325,000 estate threshold to be taxed by inheritance tax.
Some 800 more estates were dragged into paying the tax mostly due to frozen tax thresholds – and this was just in the first year of the freeze.
By 2028, when the nil rate band unfreezes, thousands more will be dragged into paying the tax with rising asset values and house prices in the interim going up too.
Each individual is taxed at a rate of 40 per cent on all their assets above a threshold £325,000. This threshold is known as the nil-rate band.
However, individual homeowners can leave properties worth up to £500,000 completely IHT-free.
This is because on top of the nil-rate band (up to £325,000), there is also a main residence nil-rate band standing at £175,000.