MONEY COMMENT
More Money Than Sense

By Jane Mack (TMFJane)
December 1, 2003

According to the latest Wealth Watch survey from Lloyds TSB, 24% of rich Brits aren't aware that the rate of inheritance tax (IHT) is 40%. The bank classes the 'rich' as those who have £250,000 or more in liquid assets and/or an annual salary of at least £100,000

It's possible, of course, that these people have paid someone else to do that sort of thinking for them and that all the necessary documentation is in place to protect their assets from the Inland Revenue when they pop their clogs. But it does seem a bit strange that they're not aware that their tax liabilities could be so sizeable.

IHT is payable on everything you leave that is over and above the current threshold of £255,000. So, if you die leaving property and other assets worth, say, £500,000, the Inland Revenue can look forward to a cheque from your estate of £98,000. If you leave £1 million, your estate will owe a gob-smacking £298,000!

I only comment on this because the survey also showed that 41% of the UK's rich expect their children to be financially better off in the future than they are. That may be because they're thinking of all the money they're planning to leave them. But if they don't put mechanisms in place to protect their assets from the taxman it won't be nearly as much as they think.

Regardless of whether the rich have made plans, the 40% IHT rate applies to anyone who owns assets worth more than £255,000. With property prices as they are at the moment, you don't even have to be 'rich' to face a potential IHT bill. If you fall into that category then a bit of forward planning might be in order.

The author owns shares in Lloyds TSB.