Inheritance tax freeze extended with even more families to be hit

The Chancellor’s decision to freeze the inheritance tax bands in the Autumn Statement means more people will be hit by the tax, as the price of property and assets continues to rise. The £325,000 nil rate has stayed unchanged for almost two decades, and will do so until 2028.A person who inherits an estate often has to pay thousands of pounds because of the tax, which has to be paid within six months of the death.Laura Suter, head of personal finance at AJ Bell, said: ‘Despite just one in 25 deaths leading to inheritance tax being paid last year, it’s still widely regarded as the UK’s most hated tax.’Extending the freeze from the current 2026 to 2028 will mean that the £325,000 tax-free allowance will be unchanged for almost two decades, during a period where house prices and other asset prices have risen dramatically.’This is reflected in the government’s tax take, with £6.1billion paid in inheritance tax in the past tax year – a more than £700million increase on the previous year.READ MORE: Inflation soars to 11.1% in new 40-year-high More people are set to be hit by inheritance tax (Image: GETTY)’The freeze will make inheritance tax more mainstream and start hitting those who wouldn’t class themselves as wealthy, particularly if they aren’t eligible for the fiendishly complex residence nil rate band allowance.’The residence nil rate band increases each year in line with inflation. People can use a tool on the Government website to find out what residence nil rate band applies to their estate.Chris Etherington, partner at tax audit firm RSM, previously warned of sweeping freezes of allowances and thresholds in the Autumn Statement.He said: ‘Expect the Chancellor to enter into a supermarket sweep of freezing any and every tax allowance and threshold he can lay his hands on.DON’T MISSRishi Sunak warned ditching pension triple lock would be ‘unpopular’ [LATEST]520,000 people set to miss out on state pension triple lock increase [UPDATE]State pension triple lock may be scrapped for ‘hefty savings’ [INSIGHT] Interest rates have continued to increase (Image: EXPRESS)There is also the option to give away a larger amount of money as a gift but this will only avoid the tax if the person lives for another seven years after the gift is given.Mr Moore said: ‘It is also worth remembering that the gifting allowances have also not increased with inflation so it reduces people’s options for mitigating IHT too.’People can also reduce their liability by leaving at least some of their estate to charity, or to a number of charities.If a person leaves at least 10 percent of their net estate to a charity, they will get a reduced inheritance tax rate of 36 percent.This will apply to the remaining assets after the charitable contribution has been deducted.