The UK charges the highest proportion of inheritance or estate tax compared to a basket of world economies, with the government taking three times as much of an individual’s estate as the global average
The average UK tax take from inheritance tax (IHT) is 25.8% from an individual’s estate, compared with the world average of 7.67%, found research by UHY Hacker Young.
Simon Browning, tax partner at UHY Hacker Young in Nottingham, said: ‘In the UK we are subject to very high inheritance taxes compared to the rest of the world. These large tax bills can be extremely off putting to people looking to create wealth to pass on to their family.’
Browning said it was important for individuals to consider tax planning for the long term as early as possible, for example by making use of the seven-year rule for making gifts of assets. He also highlighted the significance of proposed changes to pensions announced in the Budget.
‘Previously, making pension contributions has always been tax efficient but the inflexible nature of the drawdown of pension funds has generally put people off pensions. This will no longer be the case, if the proposed changes come into force as planned in 2015. People will be able to draw down funds much more freely and with increased flexibility, which will be hugely beneficial in terms of tax planning,’ Browning said.