Commonly referred to as “death taxes” inheritance tax is charged at 40 percent and is already one of Britons’ most hated taxes. However, with property prices continuing to rise, it could be about to get a whole lot worse as thousands more will be caught in the net.
House prices increased 10.8 percent in the year to February 2021 according to the latest figures from the Halifax Price Index.
If this trend continues, the average UK home could soar above the £325,000 IHT nil-rate band as early as 2023.
Rather than being a tax just for the super wealthy, this would mean most people’s estates would be subject to the HM Revenue and Customs tax.
Liz Ritchie, partner at tax and advisory firm Mazars said: “We can expect to see this soar further in the coming years as thousands more homeowners are dragged into paying tax on their estates.”
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Ms Suter continued: “If it wasn’t, those who have paid into pension on the basis of the death benefits on offer would understandably feel angry at the rug being pulled from under them.
“Inheritance tax is the other lever the Treasury could pull, either by increasing the current 40 percent rate or lowering the amount that can be inherited tax-free.
“Both measures would inevitably lead to ‘death tax’ headlines, however – not something politicians generally welcome.”
It’s also a good idea to make the most of cash allowances – people can gift up to £3,000 per tax year.
As the wedding season approaches, it’s also worth bearing in mind that taxpayers can give wedding and civil partnership gifts.
They can also carry over an allowance from a previous year if it’s not been used already.
For example, a parent could gift their child up to £11,000 tax free in one year – a £5,000 gift made in consideration of marriage plus this year’s £3,000 annual exemption and last year’s if it hasn’t been used already.
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