If you have ever had to complete forms for inheritance tax, then you will be aware that it can be complicated. The Office for Tax Simplification (OTS) has identified this as a problem that they have asked the government to address. OTS are calling for a digital system, which would make it much simpler for those already experiencing a difficult time.
Teachers may feel secure that they will never have enough income to worry that inheritance tax will bother their executor. In truth, only 5% of estates are liable to pay such a tax in the event of a death. However, of the 570,000 deaths in the UK half of these resulted in the executor completing complex forms in 2015/16.
At the time of losing a loved one, executors are spending more than 50 hours completing the forms, with some needing more than 100 hours. The other alternative is to hire someone to do this for them, though at a significant cost.
The administration of estates requires loved ones to resolve the legal and tax affairs for someone who has died. At this point, tax could be deducted from the estate before distribution to any beneficiaries. This administrator must obtain the documents and calculate the value of the estate, to work out the taxes, to pay the taxes, while obtaining a grant of probate.
For nearly half of those polled by OTS, the process of getting the right forms took the most time. Only 11% found this process user-friendly. The demand by OTS for a digital system of tax seems fair. The creation of a fully integrated digital system for inheritance tax would mean that estate executors could complete and submit a probate application in a single step. They believe that a digital solution would transform the experience of those dealing with tax at such a difficult time.
The content in this article was correct on 14th January 2018. You should not rely on this article to make important financial decisions. Teachers Financial Planning does not offer advice on inheritance tax. Please use the contact form below to arrange an informal chat with an adviser and see how we can help you.