what will happen to inheritance tax in 2026

lordsea

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13-03-2025

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What Will Happen to Inheritance Tax in 2026?

Introduction: Inheritance tax (IHT) remains a significant concern for many families in the UK. With the current thresholds frozen until at least 2028, understanding the implications for 2026 and beyond is crucial for effective financial planning. This article explores the projected impact of the frozen thresholds and offers strategies for mitigating potential IHT liabilities.

H2: The Current Inheritance Tax Landscape

The current IHT threshold for estates in the UK is £325,000. Anything above this amount is subject to 40% tax. However, the residence nil-rate band (RNRB) provides an additional allowance for the value of your main residence, potentially increasing the threshold for many. This RNRB is also frozen at its current level. The key takeaway here is that the thresholds are frozen. This means that inflation will erode the real value of these allowances over time.

H2: The Impact of Frozen Thresholds on 2026

The freezing of IHT thresholds until at least 2028 means that by 2026, the real value of the nil-rate band and RNRB will have significantly decreased due to inflation. This effectively means more estates will fall into the IHT net. House prices and asset values are also likely to continue rising, further exacerbating this issue. In short, more families will be paying inheritance tax in 2026 than would have been the case had the thresholds risen in line with inflation.

H2: What You Can Do to Prepare

While predicting the exact changes in IHT by 2026 is impossible, proactive planning is essential:

• Gift Giving: Carefully considered gifts to family members during your lifetime can reduce the size of your estate subject to IHT. However, strict rules govern gifting within seven years of death. Professional advice is crucial to navigate these rules.
• Trusts: Establishing trusts can be a complex but effective way to manage assets and potentially mitigate IHT. Different types of trusts offer various levels of protection and control.
• Investments: Structuring your investments strategically can help minimize your taxable estate. Consider seeking advice from a financial advisor.
• Will Writing: A well-drafted will is paramount, ensuring your assets are distributed according to your wishes and minimizing potential tax liabilities. This includes clearly defining beneficiaries and specifying how assets should be passed on.
• Regular Review: Your financial situation and tax laws change over time. It's essential to regularly review your estate plan with a professional to ensure it remains effective and reflects the current IHT landscape.

H2: Frequently Asked Questions (FAQs)

• Q: Will the inheritance tax thresholds increase in 2026? A: Currently, the government has frozen the thresholds until at least 2028. There's no guarantee of an increase in 2026.
• Q: How much will inheritance tax cost me in 2026? A: The cost depends on the value of your estate above the nil-rate band and RNRB after taking into account any reliefs or exemptions. Professional advice is necessary to estimate your potential IHT liability.
• Q: What is the best way to reduce my inheritance tax bill? A: There is no single "best" way. A combination of strategies tailored to your individual circumstances is usually most effective. Seek advice from a financial advisor or tax specialist.

H2: Conclusion:

The freezing of IHT thresholds presents a significant challenge for estate planning in 2026 and beyond. Proactive planning, including gifting strategies, trusts, and professional advice, is crucial to mitigating the potential impact of rising inheritance tax liabilities. Don't delay; start planning today to secure your family's financial future.

(Note: This article provides general information only and does not constitute financial or legal advice. You should consult with a qualified professional for personalized guidance.)