Inheritance Tax warning as 153,000 face new or hiked bills after rule change

According to authoritative information from the Office for Budget Responsibility (OBR), 153,000 estates volition beryllium taxable to the taxation erstwhile Labour's caller rules are successful place

Over 150,000 households could look Inheritance Tax aft the changes announced successful the Budget are implemented.

According to authoritative information from the Office for Budget Responsibility (OBR), 153,000 estates volition beryllium taxable to the taxation erstwhile Labour's caller rules are successful place. Under the existent laws, you request to wage 40% Inheritance Tax connected your "estate" - truthful your property, wealth and possessions - that you walk connected aft you dice - but lone if you are leaving much than £325,000 behind.

In the Autumn Budget, Chancellor Rachel Reeves announced that from April 6 2027, pensions volition beryllium included successful your property and volition beryllium taxable to taxation for the archetypal time. According to authorities estimates, the alteration volition rise astir £1.5billion by 2030.

At the time, the authorities said those impacted by the changes would person estates worthy implicit £2million. This is due to the fact that the £175,000 residence nil complaint set – which is the allowance for passing the household location connected to nonstop descendants – starts to beryllium tapered down until it disappears entirely.

The OBR figures, collected via a Freedom of Information (FOI) petition by Interactive Investor, showed an other 31,200 estates would beryllium liable for the taxation successful 2027-28 until the extremity of the 2029-30 taxation year. A further 121,500 estates would look an accrued Inheritance Tax liability.

In the 2027/28 taxation twelvemonth alone, the mean Inheritance Tax liability is expected to beryllium £169,000 - expanding by astir £34,000 erstwhile pension assets are included successful the worth of the estate.

Interactive Investor noted that the alteration means that the estates of those with comparatively "modest assets" and pension savings could look a caller Inheritance Tax liability.

Interactive Investor calculates that idiosyncratic with a mortgage-free spot worthy £300,000 - conscionable supra the nationalist mean recorded by the Office of National Statistics (ONS) presently £290,000 - and a pension worthy £100,000 would look a taxation liability of £30,000 from April 2027, rising to £110,000 for pensions valued astatine £300,000.

The calculations presume the afloat nil-rate set (£325,000) is disposable and that the further residence nil-rate set (£175,000) does not apply.

Myron Jobson, Senior Personal Finance Analyst, interactive investor, said: “The authorities appears to beryllium tightening the screws connected inheritance tax, efficaciously widening the nett to seizure much estates. With thresholds specified arsenic the nil-rate set frozen for years amid rising spot prices and inflation, it’s nary astonishment that much families - galore of whom wouldn’t see themselves affluent - are being caught successful the IHT net. The nett volition beryllium bursting astatine the seams by the extremity of the decennary if the latest proposals travel to fruition.

“This isn’t conscionable astir the wealthiest bearing the burden; it’s portion of a broader strategy to replenish the nationalist purse. However, it risks putting further unit connected middle-class households, who are already navigating stretched finances.

“Including pensions successful inheritance taxation calculations would people a seismic shift, peculiarly for those who person meticulously crafted property plans astir the existent rules. Pensions person agelong been considered a tax-efficient conveyance for passing connected wealth, with galore relying connected their flexibility and exemptions arsenic portion of their broader property strategy."