Failure to cut inheritance tax to cost families an extra £53,000 each

Families will pay an extra £53,000 each on average because of Rishi Sunak’s failure to cut inheritance tax in the spring Budget.

Over the next five years the Treasury will raise £42bn in inheritance tax (IHT), according to the Office for Budget Responsibility, of which at least £6bn will be the direct result of fiscal drag.

This is tax that families would not have to pay if the Government chose to increase tax thresholds with inflation.

The Conservatives’ stealth tax raid has seen thousands more families facing inheritance tax bills as house prices have risen while tax bands have remained frozen.

Families must pay inheritance tax if their loved one’s estate is worth more than £325,000. This allowance, called the nil-rate band, has not changed since 2009 despite average house prices surging. Under government plans, the nil-rate band will remain frozen until at least 2028.

However, if the allowance increased every year with inflation since 2017, then in 2028 it would be worth £458,931.

As a result families will fork out an extra £53,000 on average in 2028- 29 alone, according to analysis of official figures carried out by accountancy firm RSM.

These figures do not take into account the inheritance tax arising as individuals are dragged into the net – meaning the amount raised by the Tories’ stealth tax raid will be much higher.

Camilla Taylor, of RSM, said: “An inheritance tax bill can often come as an unwelcome surprise to families. As the nil-rate band remains frozen, thousands more are likely to be pulled into the inheritance tax net. It begs the question as to whether the current inheritance tax regime is targeting the right people.” Jeremy Hunt considered cutting inheritance tax late last year as The Telegraph and Tory MPs called for an end to death duties. However, the Chancellor decided instead to slash National Insurance rates in the spring Budget.

Some homeowners were left bitterly disappointed as a result of his decision. Lauren Groom, 76, from Wiltshire, said: “For those who have worked, saved and lived prudently all their l ives, inheritance tax amounts to confiscation of family assets. It’s also hugely stressful and complicated.”