Brits have faced years of rumours about inheritance tax changes without any details being revealed - and that could continue after the election
The will they or won’t they of the past few years has turned the IHT saga into somewhat of a soap opera Over the past few years, it seems almost a tradition that, as the government heads for a Budget and begins concocting changes to tax and spending policy, a rumour starts that the chancellor is considering cutting, or even abolishing it.
The amount of attention the tax gets is in some ways quite fascinating. Unlike the centrepieces of our tax system – income tax and national insurance – IHT actually only affects a tiny minority of the population.The tax is paid on the estate of somebody who has died, but HMRC statistics show less than 4 per cent of estates paid it in 2020-21. Although the figure is set to rise in the coming years, it will still only hit a tiny proportion.
Inheritance tax is paid on the estate of someone who has passed away, with funds from the estate used to pay HM Revenue and Customs . This is done by the person dealing with the estate. On top of this, if you’re married or in a civil partnership and your estate is worth less than your threshold, the unused threshold can be added to your partner’s threshold when you die, meaning they can end up having a threshold of up to £1m.
The estate can pay at a reduced rate of 36 per cent on some assets if it leaves 10 per cent or more of the “net value” to charity. You can also give away a total of £3,000 worth of gifts each tax year without them being added to the value of your estate, even if you do pass away within seven years.The amount paid by Britons in IHT last year hit a record level. Between April 2023 and March 2024 some £7.5bn was paid in IHT, which is £0.4bn higher than the same period last year.It means if IHT were abolished, a new Government would have to cut spending or increase taxes elsewhere.
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