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Could gifting mitigate the impact of nearly 20 years of frozen Inheritance Tax thresholds?

At the Autumn Statement on 17 November 2022, the Chancellor, Jeremy Hunt, announced that Inheritance Tax (IHT) thresholds will be kept at their current levels for an additional two years until April 2028 – meaning they are not expected to change for another five and a half years!

As a result, the main IHT Nil Rate Band (NRB) will not have changed for nearly two decades since it was set at its current level of £325,000 in April 2009.

The effect is significant. Had thresholds kept pace with inflation, the NRB would now be approaching £500,000.

Meanwhile, the value of the average property has nearly doubled from £155,852 in April 2009 to £294,559 in September 2022, meaning that the nil rate band would have risen to roughly £650,000 on that measure.

The Residence Nil Rate Band (RNRB), which allows up to £325,000 of the value of a main residence to be exempted from IHT when left to a ‘direct descendent’, reached its current level of £175,000 in April 2020. It will remain at that level until April 2028, meaning it will have been changed in nearly a decade by that point.

Essentially, estates that would previously have been some way off the threshold are being pulled into IHT, while estates that would already have been affected by IHT are incurring bills on a larger proportion of their value.

This means that planning for IHT is more important than ever.

Gifting and Inheritance Tax

Gifting is one of the most effective ways to plan for IHT. Gifts given more than seven years before your death are not subject to Inheritance Tax.

In the seven years running up to your death, you can gift up to £3,000 a year tax-free and carry any unused amount forward by up to one tax year.

You can also give an unlimited number of gifts worth £250 each year, as long as they are given to different people.

Birthday and Christmas gifts given from your normal income are also not affected by IHT.

You can also make a tax-free wedding or civil partnership gift of £5,000 to your child, £2,500 to a grandchild or great-grandchild, or £1,000 to any other person.

Gifts in the final seven years of your life that are not subject to any of these exemptions but where your estate is valued at more than the IHT threshold are subject to taper relief, which means more tax will be due, the closer to your death the gift was given.

Years between gift and deathRate of tax on the gift
3 to 4 years32%
4 to 5 years24%
5 to 6 years16%
6 to 7 years8%
7 or more0%


The rules around gifting and IHT are complex and you should seek professional advice.

Speak to us now to find out more.


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