HMRC's Inheritance Tax (IHT) thresholds have not changed since 2009, personal finance experts have warned, and the situation is set to worsen in 2027.
Frozen Nil Rate Band
The IHT nil rate band has remained frozen at £325,000 for almost 17 years. In 2009, it increased from £312,000 to £325,000, a rise of around four percent. Saltus, a wealth manager, found that 50 percent of respondents believe the threshold should be raised, while one in three felt inheritance tax should be scrapped altogether.
Public Opinion on Thresholds
Sixteen percent of those surveyed backed a threshold of between £500,000 and £1 million. Saltus also found that eight percent favored a higher range of between £2 million and £5 million. Had the IHT nil rate band continued to rise in line with historical increases prior to 2009, it would now stand at around £581,000, according to Saltus.
Expert Commentary
Alex Pugh, chartered financial planner at Saltus, said: "Keeping the threshold frozen effectively acts as stealth taxation, increasing the number of estates caught by Inheritance Tax without formally raising rates. If high value assets such as pensions are going to be brought into the IHT net, there is a strong argument that thresholds should at least start rising again. Even modest increases, in line with inflation for example, would help prevent more families from being pulled into the tax system simply because asset values have grown."
Concerns Over Pension Changes
Pugh added: "High net worth individuals are increasingly concerned that pensions entering the scope of Inheritance Tax could have a significant impact on their estates. It is one of the biggest concerns amongst our clients at the moment - they want certainty about how these rules will affect them and what planning options are realistic. While in many cases the immediate impact may be limited because the spousal exemption continues to apply, the issue becomes even more relevant when benefits pass to children or other beneficiaries. Because the rules are changing, it is important that people review their estate planning arrangements, including death benefit nominations, and seek professional advice to ensure they still work as intended."
