Before the announcement of the Spring Budget on Wednesday, there were rumours of a change to inheritance tax. Some sources claimed the estate value threshold would be raised, so high-value estates would have to pay less tax, and more people would be able to pay nothing at all. Other sources claimed that the tax would be abolished outright…
Now that the entire budget has been released, is there any validity to those rumours?
Introduction
Inheritance Tax is a tax placed on the value of an estate that is passed on after the death of an individual. Value and forms of inheritance vary, from homes to businesses to personal belongings and collections. In cases where the inheritance is over a certain value threshold, the tax will be applied against the estate.
Inheritance tax is charged at 40% above a threshold, currently set at £325,000. This threshold is often termed the ‘nil-rate band’. If your estate totals at less than £325,000 then you pay no inheritance tax.
There are many reliefs in place from IHT, such as assets transferred to a spouse or civil partner being completely exempt. Inheritance passed to a direct descendant also has an increased nil-rate band of £500,000.
Many people use estate planning strategies such as gifting to reduce the total IHT paid and, therefore, make their inheritance more efficient and beneficial for their loved ones.
However, IHT is a deeply unpopular tax, which, according to statistics, has impacted 17% more estates over the past couple of years. Detractors have likened it to a form of grave robbery.
The tax remained in place, however, and it remains a source of income for the UK Government. IHT was worth £7.1 billion to during the 2022-2023 financial year. National debt is high, and the economy is still struggling to recover from Covid. Any government would be reluctant to give up such a lucrative source of income, and this raises the concern that other taxes would need to be raised to make up the shortfall, potentially impacting less affluent families.
The Truth
There were no changes to Inheritance Tax made in the budget released by Jeremy Hunt this Wednesday. While changes were made to certain property taxes, the Inheritance tax wasn’t mentioned in the Spring Budget. This revelation stood as an important reminder to stay sceptical of rumours, particularly in the arena of law and politics.
Contact Us
Because the budget announcement was silent on IHT, we need to assume that it is here to stay, and all previous rumours about abolition and reform were false. If you have concerns about inheritance or estate planning, you can speak to our Wills & Probate experts by contacting us using our contact form or by giving us a call at 0330 111 3131.