It was previously frozen until 2025-26 when Prime Minister Rishi Sunak was prime minister, but Jeremy Hunt extended the freeze to 2028 in a statement last fall. It was part of a broader tax raid to rebalance the books after Kwasi Kwarteng’s ill-fated mini-budget.
The income tax threshold freeze has also been extended from 2025-26 to 2028 and the tax-free dividend quota has been reduced to £1,000 in 2023-24 and £500 the following year.
The annual capital gains tax deduction has also been reduced from £12,300 to £6,000 from 2023-24 and to £3,000 the following year.
Quilter’s David Gibb said:
“The consistent rise in house prices has also exacerbated the problem, ultimately resulting in more individuals falling into the IHTnet trap.”
Everyone benefits from the £325,000 tax free allowance, or zero rate band. If the estate is less than this when a person dies, no tax is paid. However, if the property is worth more than this, anything over the threshold will be taxed at up to 40%.