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UK adults wasting £2 billion in inheritance tax

UK taxpayers will waste nearly £2 billion this year due to poor inheritance tax (IHT) planning, according to the annual Tax Action report by unbiased.co.uk.

Amidst election fever, new research reveals over a third of consumers support the Tory pledge to raise the IHT threshold to £1 million - meaning far fewer people would have to pay it.

In addition, while one in three people predict substantial tax hikes post the General Election, 86 per cent admit to doing nothing to reduce their tax burden.

Lack of IHT provision represents the second biggest tax wastage area in the UK. This figure could be set to increase as this year's Budget announced the IHT threshold would be frozen for the next four years at £325,000 - rather than rising in line with inflation.

Unbiased.co.uk's annual Tax Action campaign aims to help people recognise their tax liabilities and take steps to avoid unnecessary tax payments. The research shows one of the main causes of ‘death tax' wastage is the inclusion in personal estates of the proceeds of life assurance policies, which if written in trust, would not be subject to inheritance tax.

Karen Barrett, chief executive of unbiased.co.uk, said, ‘With Tory plans to raise the inheritance tax threshold to £1 million, IHT is now a key topic on the election agenda. Our annual Tax Action report shows that vast sums are being lost from estates every year because the deceased had not made adequate provision for inheritance tax. Such situations can only bring additional unwelcome stress for the deceased's family at an already difficult time, as this tax must be paid before the estate is released and any inheritance can be passed on.

In order to protect family and loved ones, it is essential to have provisions in place after you're gone. The easiest way to prevent unnecessary tax payments such as IHT is to visit an independent financial adviser who specialises in tax planning advice. An IFA will ensure that all advice provided is appropriate for your personal and family financial situation.

Barrett added, ‘As well as having your tax affairs organised, it is also crucial you have a valid will in place to ensure your legacy does not involve just leaving a large inheritance tax bill for your loved ones.’

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