Many over-45s in the dark when it comes to IHT

New research has uncovered an "alarming" lack of awareness about inheritance tax (IHT).

According to Canada Life's latest annual report on IHT, half (50%) of liable over-45s admitted they were unaware that their main property could be subject to IHT. This is a significant increase from just over one in three (36%) a year ago.

The lack of knowledge extends beyond property to other assets, Professional Adviser reports.

Of the 1,002 UK consumers surveyed, more than three-fifths (62%) did not think their pension savings are subject to IHT, compared to 57% a year ago. Another two-thirds (66%) were not aware that agricultural land is also subject to the tax, up from 57% last year.

The survey also found that a majority (71%) of people are unaware of the current IHT threshold of £325,000 per person, and there is confusion over the nil rate band and the rate at which assets above the threshold are taxed.

Lastly, just one in ten (9%) of the over-45s surveyed were aware of the rate that applies when at least 10% of a person's estate is left to charity, and under a third (28%) know the annual exemption rate they are entitled to.

"IHT ignorance is rising at an alarming rate in the UK, and there is no indication that this will stop anytime soon," commented Canada Life senior technical manager Neil Jones.

"The lack of knowledge about the tax threshold on which assets are subject to inheritance tax has the potential to destabilise estate planning and disrupt plans for people to pass their wealth onto future generations."