Having surveyed 1,001 UK consumers aged 45 or over with assets in excess of £325,000 (€377,065, $ 409,354) the life insurer found that the majority did not know about the new family home inheritance allowance, which provides a new additional allowance of £175,000 for passing on property to relatives tax free.
Despite being widely publicised since it was announced in the UK’s 2015 budget, just 5% of respondents knew that the new total allowance will be up to £175,000 for an individual, even though 78% said that wealth should be passed on from one generation to the next without any tax being due.
Combined with the existing IHT threshold of £650,000 for a couple, the new allowance means the total amount that is tax free up to £1m, although this will be staged in over the next four years.
However, there will be a tapered withdrawal of the additional nil-rate band for estates with a value of over £2m, at a withdrawal rate of £1 for every £2 above this threshold – something 63% of those questioned also didn’t know.
Almost half (47%) were unaware of the phasing process and timings, with nearly a quarter of respondents (24%) wrongly if the full allowance would be available next.
Just 7% knew that the final threshold would be introduced in 2020/21.
Karen Stacey, head of technical services at Canada Life, said: “A new allowance that helps the many people caught by the freeze to the IHT threshold by their increasing property wealth is welcome – but it is only useful if it is understood.
“The findings of our research reveal a widespread lack of understanding about the new family home allowance, even though it will be available from April and should be part and parcel of any estate planning already,” she said.
She added that 80% of wealthy Britons think the inheritance tax regime is “far too complicated”, which often means that “families face paying over the odds”.
In July, HM Revenue & Customs (HMRC) set a new record by raising nearly £5bn ($6.6bn, €5.9bn) in inheritance tax, which Stacey said means it is "clearly not a tax just for the wealthy".