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| 1 minute read

When a freeze is a tax rise in disguise...

Inheritance tax receipts rose by 13% for the 2021/21 tax year with increases continuing to be seen for April and May 2022.

The rise in the inheritance tax (IHT) receipts by HM Revenue and Customs are a direct result of the nil rate band (the value of an estate which is inheritance tax free) being frozen since 2009 - and therefore not adjusting in line with inflation - and being particularly far behind rising property prices.

The nil rate band (NRB) is not due to be increased until at least tax year 2025-26 by which time the Office of Budget Responsibility has estimated that inheritance tax receipts could increase by more than a third to over £8.3 billion. In effect the freeze in the Nil Rate Band means more people have fallen - and will continue to fall into - the requirement to pay IHT. The freeze of the NRB is a tax rise by another name, clearly illustrated by both the rate of increased tax taken by HMRC and the predictions for continued increased tax liabilities over the forthcoming years.

Ensuring those impacted by rising property values and a stagnant NRB understand their position and the options available to them is vital - there are valid legal steps which can be taken to minimise the IHT a person pays on their estate. Through well planned life time gifting, preservation and use of all  available exemptions and allowances, IHT liabilities can be legitimately reduced.

Ensure you consider your own and/or your clients IHT position and take early specialist advice to plan for the future and appropriately mitigate tax payable. If you'd like to explore your tax position and how you can mitigate your liability do get in touch - my colleagues and I would be delighted to assist.

In 2022-23 we forecast that IHT will raise £6.7 billion. This represents 0.7 per cent of all receipts and is equivalent to 0.3 per cent of national income. The rate of IHT is normally 40 per cent on the value of an estate above a threshold of £325,000. This threshold is frozen up to and including 2025-26. Any unused threshold may be transferred to a surviving spouse or civil partner, increasing their combined threshold to up to £650,000. There is an additional transferrable main residence nil rate band of £175,000 available when a home is left to children or other direct descendants. T


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