Inheritance tax paid by families has doubled in a decade
Posted on 27th May 2022
You have a tax-free IHT allowance of £325,000, known as the nil-rate band or NRB. There’s also a residence nil rate band (RNRB) of £175,000 if you pass on a family home to direct descendants, although it is reduced if your estate is worth more than £2million. This means a single person could pass on £500,000 IHT-free and married couples and civil partners could leave £1million.
However, beyond these thresholds your family will pay 40% IHT on your estate when you die.
Despite rising inflation and increasing house prices the NRB has been the same since 2009/10. The RNRB was introduced in the 2017/18 tax year, starting at £100,000 and increasing by £25,000 each year until it reached £175,000 in 2020/21.
The government has said that these thresholds will stay the same until at least April 2026.
Experts say the thresholds are far too low and that they should rise in line with property inflation.
The money the government receives from inheritance tax has increased from £2.7billion in 2010 to £5.4billion. The Treasury says it will be £7.6billion a year by 2027.
According to the Office of National Statistics the average house price in the UK was £274,000 in January 2022 which is an increase of 9.6% in a year. Although house prices in London are increasing more slowly the average sale value is just over £510,000 – more than three times the average value of a house in the North East.
Although changes to IHT were anticipated in the Chancellor’s Spring Statement on 23 March no changes were announced.
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