Ahead of the Autumn Statement later, advisers have shared their views on inheritance tax (IHT) planning amid expectations the chancellor will extend the government’s threshold freeze until 2028.
Thresholds are widely predicted to be frozen for a further two years in the Autumn Statement later this morning. Thresholds were frozen until 2025/26 by then-chancellor Rishi Sunak.
The point at which people pay IHT has been the same since 2009 - £325,00 for a single person but with transferable bands between spouses and residential property reliefs, most married couples will have a total threshold of £1m.
Thera Wealth Management owner Philip Dragoumis said: "Stealth taxes, or tax allowances not increasing in line with inflation, are a way to raise revenue without significant political cost.
"Expect to see more of these in the budget to plug the fiscal gap. IHT is very much a voluntary tax. It can be mitigated significantly with the proper wills and planning in place."
He added: "Lifetime gifts, trusts, taking out whole of life insurance or investing in business relief schemes can all help reduce the tax burden. Another way of reducing it, of course, is to spend your money when you're alive and enjoy life."
Chapter 3 Financial Planning financial planner Colin Bates quoted former Labour chancellor Roy Jenkins who said IHT was a "voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue".
Bates said: "More than any other tax that we all face, IHT mitigation is all about the planning. There are many ways to reduce this tax, from gifting to setting up trusts. Also, don't forget that money in your pension is also not subject to IHT.
"The key is to start early and plan well and you can still very much control if you want to give away all your money to your heirs or HMRC. Having said all of that, the easiest way to mitigate IHT is to spend it all whilst you are alive and live the fullest life you can imagine."
Wildcat Law co-founder and financial planner David Robinson also said he viewed IHT as a "voluntary tax".
"With a potential combined IHT nil rate band and main residence nil rate band of £500,000 (£1m for married couples and civil partnerships), for those with less than £2m in total, this is not an issue that is going to be a big vote loser in many areas.
"However, in the south of England, this is a very real issue for many families that are not ‘wealthy' but have simply benefited from living in areas of high house price growth.
"If you have significant assets aside from your home, you can use a number of investment vehicles or trusts to mitigate or even remove the potential IHT liability altogether. If your main asset is your home, you are far more restricted in what you can do but there are options, so always speak to an estate practitioner. These can be lawyers or financial advisers.
WThe key to successful IHT planning is to act early, as the longer you delay the fewer options that will be available to you, which will ultimately increase the potential IHT bill payable by your beneficiaries."
The Orchard Practice Chartered financial planner Joshua Gerstler added: "It used to be that only the super-rich needed to pay IHT and now we are seeing more and more middle-class families being dragged into it.
"It is unfair on those who work hard and pay every other tax all their lives, to then be penalised again just for wanting to pass something onto their children. There are things financial planners can do to mitigate this tax, however, the point is that we should not have to."
