The value of inheritance tax reliefs has been slashed by a third because governments have failed to raise them in line with inflation.
While delivering a painful blow to savers and their relatives as they depreciate in value, some reliefs have become lucrative stealth taxes for the government as they have not been raised for more than three decades.
Peter Goodman, partner at Wilkins Kennedy, says: "Simple reliefs such as the annual allowance on transfers or gifts are very popular, but £3,000 doesn't go as far today as it did in 1981. People will quickly use up this allowance."
"This means families are forced to look into alternatives. The regular 'gifts out of income' relief is a more generous and flexible relief, but it requires a lot of record-keeping prior to a death and many families will only realise this when it's too late."
Meanwhile, the vast majority of relatives of those who have served in the British Army are unaware that they are exempt from inheritance tax if their death was caused by an injury or a disease caught or aggravated while they were on active service.
In a recent court case over the estate of a war veteran, a chance comment made by a relative saved the estate a £330,000 IHT bill. The former Wren died from Mesothelioma (a rare form of cancer), which had been caused during her WW2 years spent working in buildings constructed of asbestos.
Doug Murray, probate manager at Adams & Remers, said: "In this particular case the deceased was an elderly lady and nothing had been mentioned about the cause of her death when we took on the probate for her estate. It was only when discussing her death certificate and the unusual cause of death that her wartime past came out. The family were completely unaware that her estate would be considered IHT-free as so many years had passed since her wartime service."
Earlier in 2012, Unbiased.co.uk revealed that UK taxpayers would waste £448m this year due to poor inheritance tax (IHT) planning when it comes to their life insurance policies.
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