A recent poll revealed that half of the public still opposes increasing inheritance tax (IHT) rates, while two-thirds believe the £325,000 threshold should be raised. Despite this, only 24,500 estates (4.39% of estates in the 2021/22 tax year) were liable for IHT across the UK. The current threshold stands at £325,000, with any inheritance above this subject to a 40% tax.
With the upcoming Budget, there is widespread speculation about potential changes to IHT. Some predict an increase in the rate or a lowering of the threshold. While Chancellor Rachel Reeves and Prime Minister Keir Starmer have ruled out changes to national insurance, income tax, and VAT, questions about IHT, however, have been largely ignored.
The Institute for Fiscal Studies has suggested that raising VAT or income tax could generate £2 billion, contributing to closing the £22bn deficit. Meanwhile, public support for abolishing IHT has fallen, with only 49% in favour, compared to 55% in 2023.
According to RSM, the threshold freeze until 2028 could result in 10,000 more estates becoming liable for IHT. This freeze, alongside rising property values, is contributing to record-breaking IHT receipts, with 2024 expected to set a new high.
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