Brits set to waste £1.6bn on inheritance tax

UK adults are set to waste £1.6 billion this year alone through poor inheritance tax planning.

This is £400 million more than last year, according to figures from IFA Promotion - the organisation promoting the benefits of independent financial advice.

Inheritance tax is paid when the estate of the deceased is worth more than £275,000.

It is charged at 40 per cent of the value of the estate above this figure, and includes gifts made by the deceased in the seven years before their death.

A recent report by Lombard Street and Grant Thornton calculates that rising property prices mean that 3.6 million estates in the UK will become liable for inheritance tax by 2009.

"People need to be aware that the inheritance tax threshold has failed to rise in line with soaring property prices over the last few years and that you don’t have to be rich to be subject to inheritance tax," said David Elms, chief executive of IFA Promotion.

"It’s vital that people seek out advice from an independent financial adviser, so they can make informed decisions when it comes to inheritance tax planning and avoid wasting their precious inheritance unnecessarily."

Steps people can take to minimise their inheritance tax exposure include holding life insurance polices that are written in trust, estate planning, will writing, executorship and more general trust services.