Majority want Inheritance Tax scrapped or cut as rate is frozen again

More than half (52 per cent) of UK adults want to see Inheritance Tax (IHT) either scrapped or reduced, according to a new survey.

It comes as £8 billion is expected to be raised in IHT receipts by 2027/28 after Chancellor Jeremy Hunt announced a freeze on the 40 per cent threshold in his Autumn Statement.

That figure from the Office for Budget Responsibility (OBR) shows an increase of 28 per cent in that period.

The survey by Handelsbanken Wealth & Asset Management shows more than a quarter (27 per cent) of adults want to see IHT scrapped and a quarter (25 per cent) want to see it reduced, with over-65s at 30 per cent most in favour compared with just 22 per cent of 35 to 49-year-olds

The Treasury took in £4.1 billion of Inheritance Tax from April to October this year, £ 500 million higher than in the same period a year earlier and an increase of 14 per cent, according to HMRC.

How does it work?

There’s normally no Inheritance Tax to pay if either:

• The value of your estate is below the £325,000 threshold
• You leave everything above the £325,000 threshold to your spouse, civil partner, a charity or a community amateur sports club

The standard 40 per cent is only charged on the part of the estate that’s above that threshold.

For example: If the estate is worth £500,000, the Inheritance Tax charged will be 40 per cent of £175,000 (£500,000 minus £325,000).

But with house prices rising and the value of estates increasing, more people are likely to be dragged into paying the tax.

What else can you do to reduce the Inheritance Tax liabilities?

• If you give away your home to your children or grandchildren your threshold can increase to £500,000
• Provide gifts of up to £3,000. This will be tax-free and under annual exemptions.

Other ways which may allow you to reduce your IHT liability include Business Property Relief and Agricultural Property Relief.