In today’s Budget announcement, Chancellor Rachel Reeves (pictured) revealed that Inheritance Tax (IHT) thresholds will remain frozen until 2030.
The previous Government froze IHT thresholds until 2028.
This means that the first £325,000 of any estate can be inherited tax-free, increasing to £500,000 if the estate includes a residence passed to direct descendants, and up to £1m when a tax-free allowance is transferred to a surviving spouse or civil partner.
Reeves said: “We will close the loophole created by the previous Government, made even bigger when the lifetime allowance was abolished by bringing inherited pensions into inheritance tax from April 2027.”
Furthermore, property relief and business property relief will be updated starting April 2026, with the first £1m of combined business and agricultural assets still exempt from inheritance tax.
However, assets above £1m will incur IHT with a 50% relief, effectively setting the rate at 20%.
The Chancellor emphasised ongoing support for small family farms, with three-quarters of claims remaining unaffected by these changes.
She also announced that a 50% relief will be applied on inheritance tax for shares on the alternative investment market and similar markets, setting an effective rate of 20%.
Stephen Lowe, group communications director at Just Group, said: “Today’s announcement by the Chancellor finally ended the speculation around whether or not inheritance tax would be targeted in Ms Reeves’ first Budget.
“She announced a number of changes and it will be the freezing of the IHT thresholds for an additional two years that will likely affect most people.
“Following the announcement, the OBR’s forecast for inheritance tax revenue was revised upwards to reflect the current and future expected value of IHT to the Treasury.
“The latest HRMC figures on the amount of inheritance tax collected point to another record year in revenue, with the half-year total announced last week exceeding the same period last year by £396m.
“The freeze in IHT thresholds, coupled with any growth in property prices will likely drag more estates into the IHT bracket and underscores the importance for people to stay on top of the value of their estate and estate planning.
“As the dust starts to settle on the Budget, we would urge individuals to seek an up-to-date estate valuation to understand any potential IHT liability.
“Estate planning is complex, and professional financial advice can be immensely helpful for people who want to manage their estate efficiently and pass on the maximum inheritance to loved ones.”
