The Institute of Fiscal Studies (IFS) report published this week shows that most wealth accumulated by younger people actually comes from inheritance, rather than from their own generation of wealth.
The research shows a sharp rise in the number of families paying inheritance tax (IHT) in recent years, with the total bill for death duties exceeding £4 billion for the first time.
Andrew Hood, Senior Research Economist at IFS, said: “The wealth of younger generations looks set to depend more on who their parents are than was the case for older generations.
“Today’s elderly have much more wealth to leave to their children than their predecessors did, primarily as the result of higher homeownership rates and rising house prices."
He goes on to say that whilst this may be the case, young adults will find it more difficult than previous generations to accumulate their own wealth due to a sharp fall in the number of homeowners, the significant decline in benefit pensions in the private sector and a lack of growth in incomes.
The IFS study predicts a further rise in IHT receipts as the number of over 80s expecting to hand down amounts over £150,000 has risen from 24 per cent to 44 per cent in 10 years.
IHT – a legitimately 'avoidable tax'
By not understanding the rules relating to IHT, families could unnecessarily end up paying tens or even hundreds of thousands of pounds in tax.
Through careful planning, IHT can be mitigated. We do however recommend that planning starts as early as possible.
Our Beavis Morgan tax experts are available to guide you and advise on the available strategies. If you would like to know more, please contact Barrie Dunning or your usual Beavis Morgan Partner.