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A tax expert says simple errors can add up to huge tax bills that otherwise wouldn’t be faced
An inheritance tax expert is warning families that simple planning mistakes could cost them hundreds of thousands of pounds. She said that, too often, people write a will but fail to consider inheritance tax at the same time, a “critical oversight” when the tax bill from HMRC can claim up to 40 per cent of everything they leave behind.
Worse still, the money is often due before loved ones can access bank accounts or property. At a time of grief, families can find themselves scrambling to raise huge sums just to settle the tax bill.
Expert Laura Rumsey, from solicitors Rogers and Norton, said: “I regularly see families caught out by the same avoidable mistakes. These are not complex loopholes; they are straightforward steps that many people just don’t realise they need to take. By understanding the rules and planning ahead, families can protect what they’ve worked hard for and avoid leaving their loved ones with an unexpected and potentially devastating bill.”
Not being married could cost your partner £100,000s
With UK marriages predicted to fall to historic lows, with just three in 10 people expected to marry by 2050, Laura warned many couples may not realise the financial consequences.
“If you are married and leave assets to your spouse, you are able to claim spousal exemption. This is important as the transfer between spouses on death means none of the estate is lost to tax,” she said.
That allows assets to pass tax-free, and “when the second spouse dies you will also have the availability of their unused tax-free bands”, potentially allowing families to pass on up to £1 million without inheritance tax. But the law is clear: “Being married really is beneficial for tax planning and remember that legally there is no such thing as a common law spouse.”
An unmarried partner inheriting a £500,000 estate could face a bill of around £70,000, a costly shock many simply don’t see coming.
The £1million tax-free loophole families forget
For many parents, the family home is more than bricks and mortar. It’s the place where children grew up and memories were made. Naturally, most want to pass it on. What they don’t always realise is that doing so could unlock a significant extra tax-free allowance.
“If you have a property that you are planning to leave to your children, you can claim up to an additional £175,000 each for you and your spouse, depending on the value of your property,” Laura said. When combined with the standard nil rate bands, “this could mean that, with a carefully planned will, married couples with children could claim up to £1million tax-free allowances on second death”.
Without proper planning, families risk losing part of that allowance and potentially paying far more tax than necessary, she said.
The two-year rule that could save your family £100,000s
When wealth passes down through generations, there’s a real risk that the same assets are taxed more than once. But many families don’t realise there is a legal way to adjust an inheritance after someone has died.
“Often people’s wealth can be generational and, to avoid double taxation of the same assets, it is possible to consider deeds of variation,” Laura said.
“These legal documents allow adult beneficiaries with capacity to change the distribution of their inheritance to other people, usually their children, for example. This means that the gift comes from the original deceased and can, for example, bypass a generation, ensuring that wealth is passed on efficiently.”
Importantly, “these deeds of variation can be considered and prepared up to two years after the date of death, which allows for careful planning before being actioned”, Laura added, concluding that, for families willing to take advice, that two-year window could make a substantial financial difference.
