Inheritance Tax Nil Rate Band frozen until 2019
12th February, 2013
Government policy imposed this week means that the inheritance tax (IHT) nil rate band (NRB) will remain frozen at its current level until 2019, despite suggestions last year that the level could increase in 2015 in line with inflation.
The current NRB of £325,000 has been in place since 2009. The announcement on Monday is a U turn from the governments autumn statement last year when the Chancellor stated the NRB would increase by 1% to £329,000 in 2015. If the threshold had increased with RPI the NRB would be around £358,000 today and was estimated to rise to approximately £420,000 in 2019.
The extended freeze on the IHT allowance coincides with the government’s plans for funding elderly care and will force many more families into the 40% IHT band. Early reports suggest the policy will affect upwards of 4 million people. At present every person in England & Wales can leave up to £325,000 IHT free on death (subject to certain exceptions). Assets over this threshold are then taxed at 40%.
Many people mistakenly think IHT is not something to worry about, believing that as the value of their estates increase, tax allowances will keep pace. Families all too often pay out large sums to the taxman which could have been significantly reduced with correct specialist advice. The extended freeze on the NRB makes it even more important to plan ahead.
If you are concerned how the IHT rules affect you or would like to discuss your estate planning generally please contact a member of our Wills Trusts and Tax team on 01244 405555.
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