Consumers are failing to ensure their affairs are in order before they die.
More ‘death tax’ is being paid out because people are not making the necessary financial arrangements.
British taxpayers will waste almost £1.3 billion this year due to poor inheritance tax (IHT) planning , according to new study.
Financial website unbiased.co.uk found that nine out of ten people have done nothing in the past 12 months to reduce the amount they will pay despite ‘death tax’ making it into the top five list of taxes Britons want to most abolish. Other taxes in the list include fuel duty, council tax, the TV license fee and income tax.
Over £13 billion in unnecessary tax payments are expected to be wasted in total across the UK with IHT alone, the second largest area of waste, making up 10% of this figure. However, the most money is lost through tax credits – £8.5 billion is wasted through failures to claim child tax credits, working tax credits, pension credits and child benefit.
The situation is set to get worse now that the IHT threshold will remain frozen at £325,000 for the next three years instead of rising with inflation.
Karen Barrett, chief executive of unbiased.co.uk, said: “Vast sums are being paid unnecessarily in inheritance tax every year because the deceased had not made adequate provision. Such situations can only bring additional unwelcome stress for the deceased’s family at an already difficult time, as the tax must be paid before the estate can be released and any inheritances can be passed on”.
She added: “With the IHT threshold frozen for another three years, it is important to make sure your financial affairs are in order to protect your family and loved ones after you have gone”.