HMRC have published a new research report ‘Lifetime Gifting: Reliefs, Exemptions, and Behaviours’ into taxpayer awareness of the inheritance tax (IHT) rules and how it influences the making of lifetime gifts.

The aim of the study, conducted by the National Centre for Social Research in collaboration with the Institute for Fiscal Studies, was to:

The research, which excluded gifts between spouses and to minor children, showed that:

Taxpayers were quizzed on their knowledge of the IHT rules and exemptions. Only 25% scored five or more on the quiz, gave a confidence score of six or more out of ten and could be classified as having a working knowledge of IHT rules based on questions asked.

Unsurprisingly those most likely to be affected by IHT (i.e. the over 60’s with a current wealth or intended inheritance value close to or above IHT thresholds), had made the most gifts and the largest gifts. 18% said they gave more than £20,000 in the two years prior to the interview, compared with 6% for the rest of the population. However, IHT was still not cited as the primary reason for giving for most of this group of taxpayers.

The fact that IHT does not influence most people giving away assets is perhaps to be expected given the relatively low number who understand the rules and exemptions available. It is to be hoped that the work currently being undertaken by the OTS in respect of simplifying the IHT rules will ultimately result in a better understanding of the tax amongst the general population.

Links to our guides:

IHT: estate planning checklist

IHT: normal expenditure out of income (gifts)

IHT: transferable nil rate band

IHT: Transfers of value

External link:

Lifetime Gifting: Reliefs, Exemptions, and Behaviours’