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Legal News | 18.04.24

Spring into the new financial year

Most of us are now familiar with the term ‘fiscal drag’ and understand that it is not a stage name of a cabaret act, but rather where the freezing of tax thresholds increases people’s taxable income without nominal tax rates actually increasing.

There has been much talk of the impact of fiscal drag from an income tax perspective, but there is also an impact for inheritance tax.

The nil rate band threshold for inheritance tax has remained unchanged since April 2009.  The nil rate band is the amount of an individual’s estate that can be passed on IHT free (i.e. at a nil rate of IHT).  The figure remains at £325,000, the Bank of England inflation calculator suggests that inflation means that today’s equivalent figure would be £400,000.

What does this mean?

Inflation alone means that more estates are dragged into the IHT net every year.

At the same time, the various gifting exemptions (annual exemption, small gifts exemption, wedding gifts allowance) also remain unchanged.

It therefore makes sense to give your finances a spring clean and consider what tax effective steps you could take.

 

Posted By Our Wills, Tax, Trusts & Probate Team