The nil rate bands
Rachael Griffin, tax and financial planning expert at Quilter, said changes to IHT had been the subject of rumours for years.
The nil rate band allows for the first £325,000 of someone’s estate to be free of IHT upon death.
But she said the residence nil rate band adds significant complexity and is poorly understood.
She explained: “This incremental allowance of up to £175,000 per person is subject to a ‘qualifying residential interest,’ which broadly means ownership of a residential property that has been occupied as a residence at some point.
“Although irrelevant for most, heritage property saves huge amounts where it applies, often allowing estates to be passed on to the next generation without being broken up. Some buildings, land, and works of art can be exempt from inheritance tax if they meet strict qualifying conditions, such as being of outstanding historical, architectural interest, or natural beauty.
“If reports are true and Labour opts to make IHT more punitive, it could choose to balance this by modernising gifting laws.
“Simplifying the IHT regime and increasing the annual gifting exemption could ease the complexity of transferring assets and help families pass wealth on during their lifetime. Raising the gifting threshold would encourage earlier wealth transfer, reducing future IHT liabilities, and potentially boosting consumer spending."
amy.austin@ft.com
