The weather outside is still frightful, and Wednesday's Budget included a big freeze of a different kind. It was confirmed that the Inheritance Tax (IHT) nil rate band allowance will remain frozen until at least fiscal year 2017-18. This means that estates in excess of £325,000 will continue to suffer IHT on death, out of line with inflation. Where a spouse or civil partner has inherited all his or her partner's estate then on the second death the allowance remains at £650,000.
It has been estimated that about 5,000 extra estates will be liable to pay IHT over the next few years due to the freeze. It is expected that this will raise about £1 billion for the economy. As a result of this freeze those who previously assumed they had insufficient assets to need to consider IHT planning may be caught out.
It is therefore more important than ever to consider arranging your affairs to mitigate or avoid an IHT liability on your death. There are a number of simple measures which you could take to do this. These include creating a will which will distribute your estate in a tax-efficient way, giving gifts within the IHT allowances during your lifetime, and making use of any IHT exemptions such as the spouse exemption, surplus income exemption, business property relief or agricultural property relief.