Inheritance Tax threshold to remain unchanged for 17 years
Today’s Budget confirmed that the Inheritance Tax (IHT) threshold will not be changed until 2026 at the earliest – meaning that it will have been kept at the same rate for 17 years.
Boodle Hatfield, the leading private wealth law firm, says that increasing asset values, coupled with inflation, will mean thousands more estates will likely be liable to pay the tax over the coming years.
The threshold for IHT has been fixed at £325,000 since April 2009. The rise in value of assets in the subsequent period has meant that more estates than ever before are liable for the tax, which took in £5.2bn for HMRC in 2020.
If the threshold had kept up with inflation it should now stand at £446,000 – this is only set to get worse between now and 2026.
Kyra Motley Partner at Boodle Hatfield says: “Few would have believed when the Inheritance Tax threshold was set in 2009 that it would still be the same in 2026.”
“A growing number of estates will be hit with a tax bill as a result.”
“Inheritance Tax was initially intended to only apply to the very wealthy. However, it has become a tax on Middle England.”
“Despite fears of a wealth tax being unfounded, the freeze on the IHT threshold is effectively a stealth increase in the tax rate that impacts a growing number of families every year.”
This article first appeared in the Financial Times.