What the Autumn Statement means for Inheritance Tax

In the Autumn Statement, the Chancellor announced that Inheritance Tax (IHT) will be frozen at their current levels for a further two years to 2028.

What is Inheritance Tax?

IHT is a tax on the estate (the property, money, and assets) of someone who’s died.

The tax is paid by the estate but affects the amount your beneficiaries could receive.

The IHT Nil-Rate Band is set at £325,000 per person, and £650,000 for married couples. The Residential Nil-Rate Band of £175,000 can extend this to £500,000, or one million pounds for a married couple, where a main residential property is passed to direct descendants.

How is Inheritance Tax affected by the Autumn Statement?

Until 2028, your assets may continue to grow, but the thresholds remain unchanged. As a result, far more estates are likely to be caught out by IHT, especially if house prices rise.

The freeze means that people who had previously hoped that thresholds would rise in 2026, may need to take additional steps to ensure their estate isn’t heavily taxed.

It is possible that a large proportion of your estate may be affected. Thus, you should begin to think about IHT at an earlier stage in your life as many who were not previously likely to be affected now are.

With this in mind, it would be beneficial to consider how to plan around IHT and the things that can be done to lessen its impact.

What can you do to reduce the Inheritance Tax liabilities?

There are several ways in which you can reduce your IHT liabilities in later life.

One way of doing so is giving gifts of up to £3,000 per annum. This will be tax-free and under annual exemptions.

This may consist of payments to help with someone’s living costs, such as someone under the age of 18. But this can also include Christmas, birthday, or wedding gifts.

Any gifts of £3,000 or a higher value in any one year may be subject to the “seven-year rule”.

This means that these gifts are added back to your estate, if you die within seven years and could become chargeable to IHT.

If you choose to give away, on death, gifts to charity, equal to 10 per cent or more of your estate, you only pay IHT at a rate of 36 per cent rather than 40%.

Other ways which may allow you to reduce your IHT liability include moving assets into Trusts, the possible availability of Business Property Relief, and Agricultural Property Relief.

At Moore Thompson we are able to explain, in no-nonsense terms, how tax issues might impact on your estate and help you sort out your financial affairs.

Our Partner, Heather Bright, who specialises in Inheritance Tax matters, will work on your behalf to ensure that your tax liability is minimised so that more of your hard-earned money stays with you, your business and, eventually, your loved ones.

Because we stay ahead of the curve, we will make sure that any changes to the tax regime are reflected in our advice to you.

To find out more, please get in touch with Heather.