Inheritance Tax Frozen until 2028: What You Need to Know

The chancellor’s autumn statement confirmed that the current Inheritance Tax threshold will be frozen until at least April 2028. This follows a previous announcement freezing it until April 2026.

The two-year extension to the lower limit means more families will be required to pay Inheritance Tax. As more estates are likely to exceed the nil rate band of £325,000.

Inheritance Tax levels

Inheritance Tax is generally payable at the rate of 40% on the part of someone’s estate over the threshold of £325,000. If the deceased left 10% or more of their estate to charity, the rate is reduced to 36%.

No Inheritance Tax is payable on assets over £325,000 left to a spouse or civil partner. If that spouse or partner has already died and did not use their full £325,000 allowance, then the unused portion can be transferred to the survivor’s estate. This means that the survivor’s estate could potentially have a total allowance of £650,000.

For a property left to immediate descendants such as children or grandchildren, there is a further £175,000 allowance. This is known as a residence nil-rate band’, and is available for the estate of both spouses. Thus meaning that there is a total potential allowance of £1 million available for a couple.

No Inheritance Tax is payable on money left to charity.

Freezing the Inheritance Tax threshold

It is estimated that as the value of estates rises, as many as 10,000 more estates could end up paying some Inheritance Tax.

Jason Hollands, managing director of online service Bestinvest, suggests that the continuing freeze on the Inheritance Tax threshold is a “significant wealth tax”.

He said: “Ever more people who would never have imagined being hit with death duties are finding that their parents or grandparents’ estates are becoming subject to these taxes. Especially given the strong rise in property and share prices over recent decades.”

Planning for the future

Inheritance Tax is something which you should consider at the time you make your Will. Your estate planning consultant will be able to ensure that your estate is structured in the best way possible. They will be able to advise you on how to safely pass on assets to your loved ones.

If you wish to reduce the amount of Inheritance Tax payable, you can also discuss the giving of lifetime gifts. These will only attract Inheritance Tax if they are made in the seven years prior to death.

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