The 2009 PBR announced legislation to freeze the IHT nil rate band for 2010/11 at £325,000. This freeze will now be extended for a further four years and will therefore have effect for chargeable IHT events made up to 6 April 2015, unless of course a new Government had other ideas.
The nil rate band was originally due to rise to £350,000 for transfers made on or after 6 April 2010.
Richard Mannion, national tax director at Smith & Williamson, the accountancy and financial services group, commented that "Inheritance tax is a largely emotional tax that in reality few families pay. The freezing of the nil rate band does however create clear political water between Labour and the Conservatives. IHT tax receipts peaked in 2007-08 bringing in £3,834 million but has since fallen to £2,218 (2009-10). (see attached graph). Historically, the nil rate band has risen in line with inflation. Taking into account average property values and other assets and investments held at death, freezing this allowance is likely to bring rather more estates into the IHT net during the next few years. This will affect couples whose joint assets are worth over £650,000, and with the IHT rate currently at 40% this may result in a significant further financial burden, especially for those whose wealth is wrapped up in property with little liquid cash."
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