How to beat the big freeze

With both the Inheritance Tax (IHT) nil-rate band and residence nil-rate band remaining frozen at existing levels until April 2026, at £325,000 and £175,000 respectively, many families are already receiving hefty IHT bills. The increase in receipts has been attributed to the big freeze in allowances, rising estate values and the sad increase in deaths among those over 60 due to the pandemic.

If you’re concerned about IHT, here are a few things to think about…

  • Gifts – remember to use your £3,000 annual allowance. You can also make gifts of up to £250 per person, to as many people as you want in each tax year; make monetary wedding gifts; donate to charities and political parties, and make gifts from surplus income that don’t affect your standard of living
  • Use trusts – for example putting money into a trust to pay for a grandchild’s education or to provide support for a relative
  • Make a Will – and keep it up to date
  • Leave money to charity – if you leave at least 10% of your net estate to charity, the IHT rate is reduced from 40% to 36%
  • Take out life assurance – this won’t reduce your estate but instead provides a lump sum to your beneficiaries to pay the bill. The policy should be written under a suitable trust
  • Take professional advice – sensible IHT tax planning can help to reduce the amount of IHT your beneficiaries will have to pay and safeguard your wealth for the future.

It is important to take professional advice before making any decision relating to your personal finances. Information within this article is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK.