Recent changes to Inheritance Tax in the UK could mean that more people will have a liability to the tax in future. The IHT threshold has remained unchanged at £325,000 since its implementation in 2009 and will not change until the end of the 2014-15 tax year.
According to one accounting firm, the frozen nil rate band could affect more people in the coming years. From 6th April 2015, the threshold will use the Consumer Prices Index as a guide to rises, rather than the Retail Prices Index which is higher. This will also have a huge effect on people who may be affected by a liability to Inheritance Tax, which is charged at 40 percent on anything above the current threshold.
If the nil rate band had continued to rise using the Retail Prices Index, the threshold would now stand at around £360,000. Indications from Treasury estimates are that approximately 1,500 more estates will be required to deal with HM Revenue & Customs administration in 2015-16, which is a complex matter. Calculations indicate that about 900 estates will have a liability to IHT, which will increase in future years.
Although 69 percent of people who took part in research carried out by Legal & General are aware of Inheritance Tax, the same number has not taken any action to minimise the amount.
Peter Bond, a tax partner at a leading accountancy firm, said:
“With these changes set to come into force in April, 2015, more people will be affected by IHT than before, making it all the more important to plan ahead to mitigate the impact.”