Autumn Budget: Inheritance Tax Thresholds Frozen Until 2031
The Autumn Budget confirmed that the inheritance tax (IHT) nil-rate bands will remain frozen until April 2031. This applies to both the main nil-rate band (NRB) and the residence nil-rate band (RNRB).
Last year’s Autumn Budget had already extended the freeze to 2030, but the Chancellor has now added a further year.
A Threshold Unchanged Since 2009
The main IHT threshold has stayed at £325,000 since 2009, with the RNRB at £175,000.
Because these thresholds haven’t risen with inflation, more families are being caught by IHT each year. If the NRB had increased in line with inflation, it would now be close to £525,000.
IHT receipts continue to climb: between April and October this year, the Treasury collected £5.2bn, £200m more than the same period last year.
Pensions Brought Into Focus
IHT planning has gained renewed attention since the government confirmed that unused pensions will fall within IHT from April 2027. This means IHT could apply to unspent pension funds and death benefits.
Concerns have been raised about whether personal representatives (PRs) will have enough time to gather the necessary information, especially as pension scheme administrators can take up to two years to determine beneficiaries. Meanwhile, estates will still face the standard IHT payment deadline of six months after death, after which interest charges apply.
Despite industry pressure to revise the plans, the government intends to proceed. The changes are forecast to raise around £1.5bn annually by 2029/30, with the average IHT bill expected to rise by £34,000.
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