IHT thresholds will be frozen for two more years but more than half of UK adults want to see it scrapped or at least reduced

by | Nov 18, 2022

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Tax

Research from Handelsbanken Wealth & Asset Management shows that more than half (52%) of UK adults want to see Inheritance Tax (IHT) scrapped or at least reduced.

The issue unites men and women, almost all age groups, regions and even political views, with scrapping or reducing IHT commanding broad support, the study from Handelsbanken Wealth & Asset Management found. There is some support for keeping IHT levels as they are, with 21% preferring the status quo, while 12% would support a rise in IHT.

Christine Ross, Client Director and Head of Private Office (North) at Handelsbanken Wealth & Asset Management commented: “Whilst there was no increase in the headline rates of tax, the pain will certainly be felt though the freezing of allowances and thresholds, even more so due to the current rate of inflation.  Higher earners, already impacted by the loss of their personal allowance on income over £100,000 will now have to pay 45% tax on income over £125,140. 

“These measures have significant tax raising potential with the reduction in the annual capital gains tax allowance alone (often unused by many savers) projected to raise £440m in 2028.  It is also worth considering how many individuals will now have to file a self-assessment tax return as a result of some of today’s announcements.”

The threshold was already frozen until April 2026, it now means that the threshold is now frozen until April 2028. The current nil rate band is £325,000, while the current residence nil rate band stands at £175,000.

Handelsbanken Wealth & Asset Management’s research shows more than a quarter (27%) of adults want to see IHT scrapped. Women (29%) are more likely to want it scrapped than men (25%) while 50 to 64-year-olds at 31% are the most in favour of scrapping the tax, compared with 29% of over-65s and 21% of 18 to 34-year-olds.

A quarter (25%) want to see IHT reduced, with over-65s at 30% most in favour compared with just 22% of 35 to 49-year-olds. Current Conservative and Liberal Democrat voters are both 57% in favour of scrapping or cutting IHT, compared with 45% of Labour voters.

Mark Collins, Head of Tax at Handelsbanken Wealth & Asset Management said: “The fact that IHT receipts are at an all-time high both in nominal terms and as a percentage of GDP underlines how important the tax is to the total Government tax take.

“Government forecasts indicate IHT receipts are set to rise to more than £6.7 billion in the current tax year, which again underlines the importance of seeking advice and regularly reviewing your affairs to reduce your exposure to inheritance tax.”

Around the country, people in Wales (32%) are most in favour of scrapping IHT, narrowly ahead of the South at 31%. Londoners are most in favour of increasing IHT compared with other regions, although it is still only 16% in favour, as the table below shows.

REGIONNORTHMIDLANDSLONDONSOUTHWALESSCOTLAND
Scrap IHT completely25%24%27%31%32%24%
Reduce IHT20%24%26%28%23%28%
Keep the same25%28%16%17%21%17%
Increase IHT14%11%16%11%11%10%
Don’t know16%13%14%12%14%21%

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