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IFS Zooms In: The Economy
Inheritance tax rises and the Budget: who's affected?
Nov 15, 2024
Helen Miller, Deputy Director at the Institute for Fiscal Studies, and David Sturrock, an IFS expert on inheritances, dive into the recent budget changes affecting inheritance tax. They discuss how just a small part of the £40 billion tax hike is from inheritance tax, yet it's dominated the headlines, especially regarding farmers. The conversation highlights the complexities of the tax, its perceived fairness, and its impact on various wealth demographics, including significant challenges for individuals with assets tied up in their homes.
46:59
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Quick takeaways
- Recent budget changes to inheritance tax regulations, including a frozen tax threshold, will increase the number of estates subject to tax.
- The updated treatment of pension pots and agricultural land under inheritance tax may significantly affect family wealth planning and continuity of family farms.
Deep dives
Overview of Inheritance Tax
Inheritance tax is imposed on the net assets of an estate after someone's death, calculating the total asset value minus any debts. The majority of individuals do not pay this tax because everyone can pass on a tax-free allowance of £325,000, along with an additional £175,000 if the family home is inherited by direct descendants. This means that with proper planning, a couple can pass on up to a million pounds without incurring any inheritance tax. Currently, only about 4% to 5% of estates are subject to this tax, reflecting its relatively minor impact on overall government revenue.
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