Published on: 5th September 2022

Inheritance Tax

The Nil Rate Band (NRB) is the threshold above which Inheritance Tax (IHT) is payable. Currently, the NRB allowance is £325,000 per person. This figure has been frozen since 2009 and will continue to remain at this figure until at least April 2026. With current inflation figures, by 2026, the NRB would be around £500,000 per person. Due to the NRB staying at £325,000, more and more families will face IHT liabilities.

Additionally, in 2017, the government introduced another allowance called the Main Residence Nil Rate Band (MRNRB). This allowance is able to be used on your family home if it is being passed to a child or direct descendant. Currently, the MRNRB is £175,000. This figure has also been frozen until 2026.

In April 2009, the last time the NRB was increased, the average cost of a property in the United Kingdom was roughly £155,000. In 2022, the average UK house price is roughly £290,000. There is a strong correlation between the increase in IHT liabilities for families and an increase in property prices. For those who will pay IHT, the average bill is now over £200,000.

In estate planning, it is always important to discuss possible IHT liabilities and determine if there are ways to mitigate taxes. For unmarried partners, this type of planning is especially valuable as the NRB allowances cannot be passed between partners who are not married or civil partners. There are also ways for married couples to save on IHT by creating trusts and ensuring that their estate distributes to their surviving spouse.

When the entire estate passes to a surviving spouse, you are able to pass the unused NRB allowances to them. Therefore, for a married couple, the IHT threshold is £1,000,000. If the total estate value is over £2,000,000, however, the amount of MRNRB that can be used is then reduced.

If you would like to discuss your current circumstances regarding Inheritance Tax and possible ways of mitigating liabilities, please consider booking a no-obligation appointment with one of our Consultants by calling 01732 868190 or by using our online form by clicking here.

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If you wish to give instructions or require general information about our Wills, Lasting Powers of Attorney, or Trusts then we will carry out a telephone or Zoom appointment. However, if you wish to give instructions to one of our Consultants and you feel that you can only do this at a Face to Face meeting we are offering, at our Consultant’s discretion, a limited number of Face to Face appointments in most of the areas we normally cover (subject to Government advice). To see the areas we normally cover please click here. To arrange an appointment please telephone 01732 868190 or click here.

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