The Chancellor of the Exchequer has confirmed the current IHT thresholds will be frozen until April 2026 in today’s Budget.
- The Chancellor forecasts to raise an extra £985m from the measure by tax year 2025/261
- IHT thresholds have been frozen since 2009
- Demand for financial advice likely to increase even further2
Neil Jones, tax and estate planning specialist at Canada Life commented: “It is disappointing that the Nil Rate Band has been frozen yet again and will remain frozen, along with the Residence Nil Rate Band until April 2026. The Nil Rate Band increased to £325,000 in April 2009 and who would have thought it would remain at this level for 17 years. With property prices and investment markets rising and the lack of any increase, we will see yet more people caught by the inheritance tax net paying this deeply unpopular tax.
“Advisers could be well-positioned to benefit from this as more people will need to look at their wealth and try to minimise the impact of inheritance tax ensuring that their wealth is protected and they can maximise the amount being passed on beneficiaries.”
Neil also commented more generally on the Budget: “There were positive messages from the Chancellor of the Exchequer in the Budget and with the changes to corporation tax delayed and the assistance being provided this should aid the economy’s recovery. He pointed out the cost of supporting people through the pandemic, highlighting the cost to the country should interest rates increase, but there was still a lack of detail on how the borrowing will be financed or repaid. So are significant changes could be on the horizon, but as of yet, just out of sight?
“There was a distinct lack of any significant announcements around Capital Gains Tax with the only mention being the freezing of the annual exemption. This is contrary to the strong expectations that Capital Gains Tax could bear the brunt of changes in the post-Covid tax system, even if tweaked ahead of more significant changes later in the year. Does this mean that CGT and investors have escaped any changes? Unlikely – he may have just skipped the tweaks.
“The Government has already announced a raft of consultations expected to be released on 23 March. These will not have any impact on this year’s financial bill but are important to make sure our tax system is fit for the ‘challenges and opportunities of the 21t century’. Is reform to Capital Gains Tax and maybe changes to Inheritance Tax included in this? Watch this space.”
According to recent research2 among financial advisers by Canada Life, over 58% of IFAs expect demand to increase for tax and estate planning advice over the next five years. A further 39% of advisers expect demand to remain the same, while only 2% thought they would see a reduction in demand for advice in this area in the future.
- Source: Budget21 Redbook, page 42 Inheritance Tax: maintain thresholds at 2020-21 levels up to and including 2025-26 Tax 0 +15 +70 +165 +290 +445
- Source: research conducted by Opinium Research among 200 financial advisers, fieldwork 13th – 19th November 2020.