Chancellor Rachel Reeves has said the inheritance tax threshold freeze has been extended from 2028 to 2030.
The tax-free amounts remain £325,000, or £500,000 for residences left to direct decedents, and £1m for married couples combining their allowances.
In her Budget, Reeves also announced a new 20% IHT rate on AIM-traded shares and said pensions will be brought into IHT from April 2027.
Regarding business and agricultural assets, Reeves confirmed there would be no IHT on the first £1m.
Rachael Griffin, tax and financial planning expert at Quilter, said: “The decision to continue the freeze on the IHT nil rate band at £325,000 will pull many more estates, which many would consider relatively modest, into the inheritance tax net.
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“The NRB has been frozen since 2009 and if it had risen in line with inflation, it should now be £503,879 so freezing this until 2030 will make this threshold even more antiquated. We are already seeing record breaking IHT receipts, and this change will compound this.
“Inheritance tax, which is already much maligned due to its complexity, will now affect more estates, particularly in areas where property values have increased sharply, pushing even average homes into the taxable category,” Griffin added.
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“The average net estate value reached £334,173 in 2019/20, meaning many will automatically surpass the NRB and may be faced with an IHT bill to pay. This has likely risen considerably in the years since, and the rapid increase in house prices will have played a significant part.
“This shift could have far-reaching financial consequences for families who rely on inheritance to maintain financial security—whether to pay off mortgages, fund education, or supplement retirement plans,” she continued. “As more estates fall within the IHT net, the financial legacy that families have carefully planned to pass down will shrink, and the tax bill will rise.”
Jamie Jenkins, director of policy at Royal London, added: “While most people will still benefit from their estate falling under the limits for Inheritance Tax, many people will have planned their retirement with a different understanding of how their wealth would be taxed and may have started taking income on this basis.
“Many advisers will now need to contact their clients and may need to rethink their approach to estate planning and income withdrawals. Helpfully, the changes don’t take effect until April 2027.”
This article was first seen in our sister publication, PA Adviser
