For most of us, winter brings freezing temperatures, frosty mornings and the annual hunt for scarves and gloves. However, there is another cold snap that we are all living through and this is one that we’ve been suffering from for more than a decade and there are no signs of it thawing anytime soon!
Welcome to the Big Freeze (Inheritance Tax version).
The Nil Rate Band (the amount that you can pass on your death free of IHT (subject to lifetime gifts)) has been stuck at £325,000 since 2009. The Residence Nil Rate Band has also been frozen for some time (£175,000 since 2020).
Whilst these thresholds haven’t budged for years, property values, investment portfolios and most assets have in fact soared in value.
Families often assume that they are “not wealthy enough for Inheritance Tax”. However, the Big Freeze means that many more people are, without any changes in behaviour.
Unlike the bracing cold of the winter months, fiscal drag is more of a silent frost, the kind that creeps in quietly.
It’s important not to remain too chilled out when it comes to Inheritance Tax Planning. In the same way you would prepare for the cold months by wrapping up warm, there are many actions that you can take now to defend against the permafrost of IHT allowances. Some of those are particularly pertinent around the festive season. Some very easy and effective wins for all.
Reminder:
Annual exemptions reset each tax year (the ideal stocking filler)
- You can give away £3,000 each year free of IHT (and last year’s if unused)
- You can also make unlimited gifts of £250 to any number of people – don’t be a scrooge this Christmas and get that chequebook out!
Whilst the temperature may be freezing outside, your estate planning shouldn’t be. With careful and considered planning you can ensure that you keep more of your wealth where it belongs (with your family).
