New statistics have revealed that 20% of parents in the UK have gifted assets to their children to mitigate inheritance tax.
Direct Line Life Insurance conducted the research throughout Britain and discovered that £227bn had been given to children from 6.9 million mums and dads. A further 19% of parents said they have not yet passed on some of their assets, but plan to do so in the future.
The value of the assets varies throughout the regions of the UK, with London parents giving the highest average amount of £119,207. London is also the most likely location for parents to transfer assets to their children.
In Scotland, the average amount transferred is £12,495, with 15% of Scottish parents gifting assets to their children to reduce the amount of tax.
The families plan to cut down on their inheritance tax, however, may not be cost-effective, as depending on the amount given, a tax could still be charged. The UK allows a yearly gifting allowance of £3,000, but any amount higher than that could still be charged tax.
Jane Morgan, Business Manager at Direct Line Life Insurance discussed the parents' motives, stating:
“Worrying about what happens to your children when you’re no longer around is natural for any parent and it is understandable that people want to maximise the money they leave behind. However, it is important that people planning to transfer money understand the tax implications that a gift might give rise to.”
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