Inheritance Tax  

'We shouldn't have to mitigate IHT'

'We shouldn't have to mitigate IHT'

Chancellor Jeremy Hunt is expected to tighten the tax screws on Britons in the Autumn Statement on Thursday (November 17) and clients will need help - but advisers have said the one tax they should not have to help with is inheritance tax.

According to Joshua Gerstler, chartered financial planner at Borehamwood-based The Orchard Practice, the government has failed repeatedly to improve IHT, which has been referred to as both a stealth tax and a voluntary tax.

Therefore he said it was up to the government to reform IHT and raise the threshold from £325,000 - the level at which it has remained since April 6 2009.

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Gerstler said: "It used to be that only the super rich needed to pay IHT and now we are seeing more and more middle class families being dragged into it.

"It is unfair on those who work hard and pay every other tax all their lives, to then be penalised again just for wanting to pass something onto their children.

"There are things financial planners can do to mitigate this tax; however the point is that we should not have to."

However given indications the government will continue with the freeze on IHT thresholds, advisers have remarked on the unfairness of persisting with a tax that once used to be the purview of the wealthy and now traps millions more.

Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial, agreed that IHT was an "absurd" stealth tax.

He said: "The fact you have to pay up to 40 per cent of your wealth to the state, simply because you had the cheek to die, is absurd.

"By freezing rates when inflation is so high, the chancellor will trap many hundreds of thousands of extra people into paying this tax in quite a stealthy way.

"With transferable bands between spouses and residential property reliefs, most married couples will have a total threshold of £1mn.

"However, house prices have increased massively since Covid and other assets have also ballooned with low interest rates, so the Treasury will have a bumper two years with this potential freeze."

He added: "Seeing an independent financial adviser who specialises in this area can save your beneficiaries thousands. We’ve had clients who have saved millions by planning early. That is why some people see IHT as the only voluntary tax.

"Just ask King Charles."

If the nil-rate band and the residence nil-rate band were to rise with inflation, Britons would see the following increase:

Nil-rate band:

Current NRB - £325,000

2026/27 NRB - £338,000

2027/28 NRB - £351,520

Residence nil-rate band:

Current RNRB - £175,000

2026/27 RNRB - £182,000

2027/28 RNRB - £189,280

Shaun Moore, chartered financial planner at Quilter, said the government was stuck between a rock and a hard place at the moment as it deals with the significant debt it took on to cope with the pandemic as well as needing to alleviate a cost-of-living crisis.