Inheritance tax bill ‘implications’ after Rishi Sunak’s Spring Statement changes

Although it was not expressly mentioned in yesterday’s statement, experts warn “there are implications” for inheritance tax (IHT) based on the changes made. Both the nil rate band and residence nil rate band IHT thresholds have been frozen until 2026.

Currently an IHT bill is 40 percent of one’s estate that is above the necessary thresholds and can include gifts made up to seven years before they died.

The nil rate band currently stands at £325,000 with estates valued under this paying no IHT.

The residence nil rate band, for passing on a property to one’s children or grandchildren, sits at £175,000 per person.

Combined, this can see a single person passing on a £500,000 using both thresholds while a married couple can pass on £1million IHT free.

Martin Brown, managing partner at Continuum shared: “Whilst we all hope that the number of wealth transfers will begin to drop as the Coronavirus pandemic enters a less deadly phase, for the remainder of the tax year we are likely to continue to see a high number of transfers.

“The high volumes of transfers combined with continuing rises in property values and more estates becoming liable to inheritance tax due to the freeze of IHT thresholds means we are very likely to see IHT receipts hit even bigger highs before the end of the tax year.”

He continued: “The Coronavirus pandemic has left clients thinking about their vulnerability and perhaps also a little more open to discussing estate planning with their family.”

It is also worth noting that the stamp duty holiday that ended in September 2021 also formed part of this time period meaning that IHT bills will likely rise exponentially with house price inflation as the average house price increased by 10.8 percent in the year to February 2022.

This is also a new record high of £278,123 average in the UK according to Halifax.

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