Many financial advisers still have doubts over the rules of the nil rate band (NRB), with over one in five unaware of how a client can use their full NRB without incurring in tax liabilities.
According to a research from Canada Life, when it comes to gifting, a significant proportion of advisers do not know the rules surrounding NRBs. One in five (21%) do not know when a client may be able to use their full NRB to gift money outside their estate without an immediate tax liability arising, increasing to a quarter (25%) of advisers with 100 or fewer clients.
Separately, over half of advisers (53%) incorrectly believe that the transferable nil rate band (TRNB) can be used for gifting by the surviving spouse.
It is no surprise that a significant proportion of advisers are not up to speed with the intricate rules surrounding gifting and the transferable nil rate band, especially if they do not deal with estate planning regularly"
Just 17% of advisers are aware that this is not the case - any available TNRB can only be used against on the death of the surviving spouse and cannot be used by them for lifetime gifting.
In general, two thirds of advisers (65%) believe that their clients are aware, where relevant, that they can give away surplus income without attracting inheritance tax on the gifts.
However, a quarter (27%) say that their clients are not aware, rising to a third (34%) of advisers in London and the South of England - where incomes are typically highest - and three in ten (31%) advisers with more than 100 clients.
Neil Jones, Tax and Wealth Specialist at Canada Life, said: "Some areas of inheritance tax can be complex and nuanced, even for the most experienced financial advisers. It is therefore no surprise that a significant proportion of advisers are not up to speed with the intricate rules surrounding gifting and the transferable nil rate band, especially if they do not deal with estate planning regularly."
"The government has signalled its intention to review the complexity of inheritance tax and the Office of Tax Simplification has already carried out its review. At the same time, there is large degree of political uncertainty at the moment, some of which will naturally reflect on IHT rules. Advisers who are unsure of the nuances of inheritance tax would be wise to seek out technical support from providers in the market to ensure they are providing the best possible advice to clients," he added.
The NRB is the inheritance tax (IHT) threshold or the amount up to which an estate pays IHT at 0% and is currently set at £325,000.
In one potential further source of confusion, in addition to the NRB, there is also the residence nil rate band (RNRB) which provides an additional 0% band for those gifting property on death only, when certain condition apply.