Data by investment platform Wealthify shows that the average parent in the UK hopes to leave an inheritance of £311,904 to their children—a figure that edges ever closer to the current £325,000 IHT threshold.
While homes left to children or grandchildren currently benefit from an additional £175,000 residence nil-rate band, bringing the total tax-free threshold to £500,000, escalating house prices could still leave some estates exposed.
Their forecast places the average home value at £325,461 by then. For properties passed to non-direct descendants or for second homes, the threshold remains frozen at £325,000 until 2029 to 2030, after which any value above this figure is taxed at 40 per cent.
In fact, while just over 4 per cent of estates currently pay IHT, the number is set to rise to over 7 per cent by 2032-33, according to Wealthify’s predictions.
“Our research shows that four in five parents are becoming increasingly concerned with the amount of inheritance tax bereaved families are paying, driving a growing trend in people looking at how to pass on money to their loved ones in a tax-efficient way.”
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Meanwhile, 38 per cent of those surveyed said they were considering gifting inheritance early to help their children buy or improve a property – a trend that may become increasingly common as prices climb.
“Still, as the law stands, if you die within seven years of the gift, it could still be subject to inheritance tax (if your estate is over the current £325,000 threshold). If you’re unsure about gifting, please seek financial advice.”
‘IHT changes could force the sale of our land’
Moor Farm, in Northumberland, which is run by Richard Watts and his wife (Photo: Feather Down/Tom & Lizzie Redman Photography)For those in agriculture and rural communities, the implications of unchanged inheritance rules are even more pronounced.
Under the new rules, the relief will be restricted to the first £1m of combined agricultural and business property, after which a 50 per cent relief from IHT will apply to a deceased individual’s estate.
Speaking to The i Paper, Richard Watts, who runs Moor Farm in Northumberland with his wife Wendy, expressed concern about the future of their land.
“While the Government acknowledges global insecurity, it continues to overlook food security as a key part of national resilience.
“More support from the Government is necessary for the industry to grow. The Government must prioritise targeted support, reform outdated tax policies, and commit to the NFU’s call for a dedicated agricultural budget to safeguard the future of British farming.”
HMRC has been contacted for comment.
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