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Families face surprise inheritance tax bills
Over 220 estates received £61 million worth of unexpected tax bills due to gifting errors.
Many families face surprise inheritance tax bills due to gifting mistakes.
Inheritance tax challenges hit families unexpectedly
Recent data shows that over 220 estates received inheritance tax bills totaling £61 million because of mismanaged gifts. Families aiming to avoid inheritance tax often overlook rules about Gifts with Reservation of Benefit. This occurs when individuals gift valuable assets, like property or cars, while still benefiting from them. For example, if a parent gives their home to a child but keeps living there without paying market rent, HMRC may not consider it a valid gift. Inheritance tax revenues are rising, with record payments reported, as more estates fall under the tax’s scope, which may increase to 8% in the coming years due to changes regarding pensions.
Key Takeaways
"Making gifts is now one of the simplest ways of reducing an IHT bill, however many people are making mistakes in the process."
Duncan Mitchell-Innes highlights common pitfalls in the gifting process that lead to tax issues.
"If you want to leave money you need to be really sure about what you're doing."
Shane van Rossum emphasizes the importance of understanding taxation rules when planning gifts.
The rising number of unexpected inheritance tax bills reveals a concerning trend. As people attempt to navigate complex tax laws and reduce liabilities through gifting, many make crucial errors that lead to additional financial burdens on their heirs. The government has frozen inheritance tax thresholds, yet asset values continue to rise, meaning more families could face the tax in the future. This situation creates a need for clearer guidance and education around gifting strategies to avoid costly mistakes.
Highlights
- Unexpected tax bills are a hard lesson for families on gifting rules.
- Many families are laying a trap for themselves with gifting.
- Understanding tax rules could save your family from financial stress.
- Gifting without knowledge could cost your heirs dearly.
Inheritance tax pitfalls pose financial risk to families
Families unaware of gifting rules may face unexpected tax burdens, leading to financial stress. As more estates become liable due to rising asset values and fixed tax thresholds, the potential for increased public backlash against such regulations grows.
As asset values continue to rise, families must stay informed to avoid expensive pitfalls.
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