Expect an extra £172,000 inheritance tax bill because of the tax threshold freeze 

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Expect an extra £172,000 inheritance tax bill because of the tax threshold freeze 

The government’s decision to continue its freeze on the Nil Rate Band is hugely disappointing and costly news for families with assets in the UK. The extended deep freeze announced by Chancellor Jeremy Hunt in the Autumn Statement means that the IHT-free threshold will remain at a total of £1 million until 2028 instead of it being adjusted for inflation. The Inheritance Tax-free thresholds, which were last increased in 2010, meaning that families will miss out on passing an additional £430,000 of assets to loved ones without having to pay tax. 

IHT Threshold Freeze 

This policy of freezing IHT thresholds could result in families paying an additional £172,000 in death duties. If the nil rate band and residence nil rate band introduced in 2017 had kept up with inflation, families would have paid no IHT on assets worth £1.43 million in 2028. 


Residence Nil Rate Band 

Despite the introduction of the residence nil rate band, which offered an additional £175,000 threshold to individuals from 2017, the total IHT-free limit for couples of £1 million falls short of what it would have been if the previous inflation-linking transferable nil rate band set by Gordon Brown, had been maintained by Osborne and his successors. This change will have a significant impact on families who want to pass on their assets to their heirs, and it is of great concern. 

Related: IHT Thresholds & Rates 

HT threshold Nil rate band Residence nil rate band Total for couples
Actual IHT thresholds in 2028 £325,000 £175,000 £1 million
If the government had uprated the nil rate band and residence nil rate band with inflation £502,000 £212,00 £1.43 million

Unfortunately, the inheritance tax thresholds will remain frozen until 2028, meaning they will not have been adjusted for nearly two decades. This is concerning as house prices have skyrocketed, with the UK average property price increasing from £156,000 in 2009 (when the current nil-rate band was set) to £295,000 today (2023). This may result in someone with a modest home exceeding the threshold based on property value alone. 

Currently, 1 in 25 estates pays IHT, but with the thresholds remaining static, this number is likely to increase. This will mainly affect those who are moderately wealthy, as those with significantly larger estates have other thresholds and allowances available and can afford professional assistance in reducing their bill. 

Related: More people pay IHT, HMRC data shows 

The government benefits greatly from death duties, and as property prices continue to increase, so does the tax collected each year. Revenue receipts of £2.38 billion were generated from IHT in 2009-10, rising to £6.1 billion last year. Predictions see the government earning almost £7 billion a year over the next six tax years. A staggering amount of money and a disappointing situation for those affected. 

IHT Planning Service 

As professionals, we are disheartened to see people failing to take advantage of tax breaks and all available IHT solutions that can help minimize the size of their estate. Don’t pay any more tax than you need to in the future. To achieve this objective, you need to make the most of the various allowances and gifting options available to you. 

Let us help you navigate the options available to you. 

Start by reviewing the IHT Planning section of our website, and feel free to download the Guide to our IHT Planning Service by clicking the banner below. 

Our primary IHT Planning solution utilises an HMRC-approved pension, which ensures all assets held in the structure are IHT-free from day one. The structure offers additional benefits, such as reduced rates of tax on property rental income (down from as high as 45% to 19%) and no Capital Gains Tax (down from as high as 28% to 0%) when you decide to sell any of your assets within the retirement plan.  

Related: Are all pensions IHT tax-free? 

Learn more about the QNUPS structure here, call us or email us directly for personalised advice at enquiries@soteriatrusts.com, or sign up for one of our monthly educational seminars by clicking the banner below.  

Don’t let the Tax Man be the single biggest beneficiary of your life’s work! 



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