Scottish laws on living wills labelled ‘ambiguous’
In modern society there is an increasing recognition that people should be allowed to choose how to die.More
Inheritance tax (IHT) has been frozen since 2009, the current nil rate band is £325,000 per person; an estate with a greater value than the nil rate band will be subject to IHT at a 40% rate. For now, not much will change as Chancellor Rishi Sunak has announced that IHT will remain frozen until 2026. Recent figures show IHT would have been over £150,000 more if the threshold had risen in line with inflation.
Increasing inflation and skyrocketing house prices over the past ten years have driven up the value of estates, which means they are more likely to be subject to the tax. Inflation hit a 40-year high of 9% in April 2022 and is thought to continue to increase into double figures, with reports from Halifax stating house prices had shot up by an eye-watering 11% in the past 12 months.
In turn, this continued freeze on IHT will hit middle-income families to a higher degree as they are being caught with a higher proportion of the tax as property prices increase. The average family home value in the UK is estimated at £282,000 while IHT remains the same and unlikely to change for another four years.
The nil-rate main residence threshold is a partial exemption to IHT that allows families to leave £175,000 from their family property to direct descendants (e.g. children and grandchildren), this has also been frozen until 2026. Christine Cairns, a tax partner at PwC, stated:
“The IHT freeze is just one example of how more and more mid-to-lower income households will be pushed into paying more tax as prices rise. For the IHT threshold to be in line with the reality of prices and costs today, it would need to be £134,690 more than its current level.”
After October 2007, once someone dies it’s possible to transfer any unused portion of a deceased spouse or civil partner’s inheritance tax, also known as the nil rate band.
Fraser and Fraser can assist with proving the transferability of a nil rate band allowance by sourcing and collating the relevant documentation as evidence required under the Finance Act 2008.
We’re happy to answer any questions you may have, please don’t hesitate to get in touch or call us on +44 (0) 20 7832 1400.