The UK Inheritance Tax Shame



Posted on: 23rd May 2023

The inheritance tax (IHT) is receiving a lot of negative press in the UK, with middle-class homeowners and parents not owning enough for it to levy on their loved ones.

Highest in the Western World

Britain’s current punitive death duty ranks among the highest in the Western world, with ever-growing grieving families having to hand over thousands of pounds whilst the ultra-wealthy enjoy the benefits of much lower rates.

A ridiculously high rate, frozen tax-free allowances and a myriad of loopholes highlighted for the super-rich are leaving Britain’s middle classes paying the price of a tax system at fault. It is more reviled because it is an all-in-one tax on death, property and the honest intention of passing on wealth through your family generations.

So far, calls for change are being passed on without any consideration for easing the burden of the Inheritance Tax. Calls for raising the threshold, cutting the levied rate or abolishing it altogether seem to be falling on deaf ears.

Urgently Needed Action

With IHT not netting much money for the government, Rishi Sunak is being bombarded with calls to cut the tax before the next election – whilst the Labour Party is plotting to raise the tax even more. What lies beneath is the wealth of hundreds of thousands of British families at stake when the polls come around.

With the 40% rate drastically high for those with amassed assets, and the house price boom and frozen thresholds expecting to drag more families into the trap over the coming years – Where do most people stand? How can independent financial advisers Manchester help?

How It Stands

Everyone gets a nil rate band of £325,000 free of inheritance tax. An estate incorporating property, cash, investments and all other assets that are lower than this upon death will have no tax due. There is an additional allowance of £175,000 when you leave your home to direct descendants, known as the residence nil-rate band.

When money surpasses those limits, the government stamps an extremely harsh 40% tax rate. That is much higher than anywhere in Europe, where IHT does not even exist. In the US, the estate tax applies only to portfolios worth more than £10.3m. Currently, only 5% of deceased person’s estates are liable for IHT, with that rate rising.

Huge inflation – as well as a cost-of-living crisis – is disproportionally affecting many people and calls to make it easier for money to flow to the next generation upon the death of a loved one.

To know how it impacts you and how to navigate around IHT, contact the team at Haven IFA today. As independent financial advisers Cheshire, we know every update and regulation that comes into play and can utilise our vast knowledge to help you navigate inheritance tax.