The nil rate band for Inheritance tax (IHT) has remained frozen at £325,000 since 2009 and will continue to be until 2026. The band will next be up for review in 2026 by which time it could be around £500,000 if increased in line with inflation unless the government decide to still freeze it and raise only the Residence Nil Rate Band (RNRB)

IHT receipts in 2009/10 were £2.38bn compared to £6.1bn in 2021/22. This is an increase of 14% on the previous year (2021/22 was £5.35bn) which constitutes the largest single-year rise in IHT receipts since 2015/16.

The Office for Budget Responsibility (OBR) suggest receipts from this tax will grow further to £8.3bn by 2026.

While IHT has historically been a tax of the very wealthy this is clearly no longer the case… this is now a concern for larger sections of society, particularly homeowners, as the IHT tax net widens.

There has also been a higher volume of wealth transfers due to Covid – partly due to more deaths in the elderly population.

There is a considerable amount of planning which can reduce IHT bills. These include setting up a trust, making full use of gift allowances which allow you to pass on money to family while reducing your estate, and making a Will and leaving a legacy to charity.”

The connection to property prices

The average cost of UK property has significantly outstripped inflation at a time when the IHT nil rate band will have been frozen for at least 17 years by April 2026. The average cost of a UK property in June 2022 was £294,845 – the comparable figure for April 2009 was £154,716.

The (RNRB) was introduced in 2017 and allows potentially a further £175,000 to be used against the main residence if left to a direct descendant. Estates over £2m will see the RNRB reduced. However, this doesn’t necessarily help all clients.

To get some help and advice on IHT, please contact Barnet Wills on 0203 189 1737

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