The Nil Rate Band (NRB) which is the amount of your estate which is taxed at 0% for IHT purposes – see yesterday’s tax tip for more information - has been set at £325,000 since April 2009.
This is despite the fact that inflation has grown by an average of 3% each year meaning that £325,000 back in 2009 is now worth over £400,000*. Your home, if nothing else, is almost certainly worth more but the NRB has not grown to reflect this.
However, the government has indicated that in April 2021 the NRB will start to increase in line with the Consumer Prices Index. Whilst this will not be an immediate fix as by 2021 the NRB will have remained stagnant for a huge 21 years, it is at least a start.
There are a few more budgets between now and April 2021, Brexit and of course the possibility of a new government but we remain hopeful that the proposed increase will stick.
These notes have been prepared for the purpose of articles only. They should not be regarded as a substitute for taking legal advice.
*Figures obtained from www.bankofengland.co.uk/monetary-policy/inflation