Budget 2021: Inheritance Tax frozen until 2026

Image: Reuters

Chancellor Rishi Sunak has announced that there will be no rises in inheritance tax until 2026, in the March Budget.

VAT registration thresholds, pensions relief and the capital gains allowance are all also being put on hold, as he outlined his economic plan, which brings the UK’s total spend on responding to the coronavirus pandemic to £407bn.

IHT currently raises around £5.4bn in taxation each year for the Treasury.

The inheritance tax threshold will also stay frozen at £325,000 per person.

The Pensions Lifetime Allowance will be maintained at £1,073,100 up to and including 2025-26. Pension rules will be changed, giving pension funds the flexibility to unlock billions of pounds to invest in innovative ventures.

Corporation tax will be increased from 19 per cent to 25 per cent in 2023, with breaks for small businesses, potentially bringing in £20billion a year. 

Earlier this week, speculation raged that inheritance tax may actually rise. While there was support for Inheritance Tax to be scrapped or altered, it was anticipated the levy could actually rise to counter public spending in the face of the Covid response.

Delivering the budget in Parliament, the chancellor said:

“This Budget meets the moment with a three-part plan to protect the jobs and livelihoods of the British people.

“First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis.

“Second, once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that.

“And, third, in today’s Budget we begin the work of building our future economy.”

The full list of Budget announcements can be found on GOV.uk.