The government has frozen the inheritance tax (IHT) thresholds for two more years.
Chancellor Jeremy Hunt announced the decisions today (17 November) at Autumn Statement.
The current nil rate band is £325,000, while the current residence nil rate band stands at £175,000.
Quilter chartered financial planner Shaun Moore said ahead of the Autumn Statement: “Freezing IHT thresholds amounts to raising taxes via the backdoor and if Sunak and Hunt choose to extend the freeze for an additional two years it is likely to net an additional £1bn for government coffers.
“The number of people having to pay IHT has risen for a number of years now and this is largely because house prices have increased at pace meaning more estates are dragged into the net due to their property wealth.
“While house prices may soon cool due to the never-ending list of financial concerns facing the UK such as inflation, energy prices and an unpredictable European war, this is unlikely to take the sting out of IHT bills for some time.
“The government are stuck between a rock and a hard place at the moment as they continue to have to cope with the significant debt it took on to cope with the pandemic but also now has the unenviable job of needing to help alleviate a cost-of-living crisis.
“Extending the frozen thresholds for an additional two years is an inheritance tax raid by stealth.”
Moore also said that gifting allowances have not increased with inflation, reducing people’s options to mitigate IHT as a result.
Individuals are allowed to give away a total of £3,000 worth of gifts each tax year and a £5,000 tax free gift to someone who is getting married or starting a civil partnership.
“If the government does choose to freeze IHT thresholds they should at least increase the gifting allowances, particularly in light of the cost of living crisis as this could help the flow of intergenerational wealth and take the sting out of the financial hardship many will be facing,” Moore added.
Date published in October by HMRC shows that IHT receipts for April to September 2022 were £3.5bn. It was £0.4bn higher than the same period a year earlier.
Reacting to these figures, Evelyn Partners tax partner Julian Rosenbloom said: “This further year-on-year increase in IHT receipts will be music to the ears of a Treasury that has a difficult task of attempting to balance the books following September’s mini-Budget.
“Given the current state of the UK economy and need to boost the government’s coffers, new chancellor Jeremy Hunt will want to do all he can to preserve cash cows, such as IHT receipts, until stability is restored to the nation’s finances.”
