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More estates to fall into Inheritance Tax net as threshold is frozen for further five years

Many more estates could attract Inheritance Tax (IHT) after the threshold was frozen for a further five years, experts have warned.

It was confirmed in this year’s Spring Budget that the IHT threshold – currently £325,000 for individuals – will be frozen until at least 2026.

But with the property market continuing to soar in value, estates previously valued below the threshold could quickly rise above it – attracting significant amounts of tax.

IHT is currently charged at 40 per cent on the value of an estate that exceeds the IHT threshold – currently £325,000 for individuals or £650,000 if combined with a spouse or civil partner.

If you give away your primary residence to children (including adopted, foster or stepchildren) or grandchildren the threshold can increase to £500,000, or £1 million if combined with a partner.

But experts say the IHT threshold has failed to keep up with inflation and rising property values.

If inflation had been taken into account since April 2009, the individual threshold would now stand at £446,000.

Likewise, the latest statistics show that UK average house prices increased by some 8.6 per cent in the year to February 2021 – tipping many estates into the IHT “danger zone”. And over the next five years, thousands more estates could fall into the tax-paying bracket.

Families who fear they may have to pay significant amounts of IHT should start planning for later life now. Our experts can help you pass down more of your hard-earned wealth to your children and grandchildren and keep your tax bill as low as possible.

For help and advice, get in touch with our expert later life planning team today.

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