{"id":120604,"date":"2026-05-18T09:30:00","date_gmt":"2026-05-18T08:30:00","guid":{"rendered":"https:\/\/en.econostrum.info\/uk\/?p=120604"},"modified":"2026-05-18T08:58:10","modified_gmt":"2026-05-18T07:58:10","slug":"hmrc-inheritance-tax-branded-a-stealth-tax","status":"publish","type":"post","link":"https:\/\/en.econostrum.info\/uk\/hmrc-inheritance-tax-branded-a-stealth-tax\/","title":{"rendered":"HMRC Inheritance Tax Rule Branded a \u201cStealth Tax\u201d as Families Lose Out"},"content":{"rendered":"\n

Britons using the annual inheritance tax gifting allowance are now able to pass on far less wealth in real terms than families could more than four decades ago. The \u00a33,000 exemption<\/strong>, unchanged since 1981, has been heavily eroded by inflation, according to legal experts.<\/p>\n\n\n\n

TWM Solicitors, a private wealth and family law firm, warned that the frozen threshold has effectively become a \u201cstealth tax\u201d as inflation and rising asset prices continue to reduce the allowance\u2019s value year after year. The issue has drawn attention to the wider effect of fiscal drag across the UK tax system. According to TWM Solicitors, cumulative inflation has risen by 354%<\/strong> since the gifting allowance was introduced, while the threshold itself has remained fixed at \u00a33,000.<\/p>\n\n\n\n

Had the allowance increased in line with inflation, it would now stand at roughly \u00a313,600<\/strong>. Instead, families are still limited to the same nominal figure set more than 40 years ago when passing on tax-free gifts during their lifetime.<\/p>\n\n\n\n

Frozen Threshold Reduces Real Value of Tax-Free Gifts<\/strong><\/h2>\n\n\n\n

The annual inheritance tax gifting exemption allows individuals to transfer up to \u00a33,000 each year without the gift being counted toward their estate for inheritance tax <\/strong>purposes. Gifts exceeding this amount may still become exempt if the donor survives for seven years after making them.<\/p>\n\n\n\n

According to TWM Solicitors<\/a>, the purchasing power of the allowance has fallen sharply since the early 1980s. In 1981, \u00a33,000 represented around 16% of the average UK house price. Today, the same figure equates to about 1%<\/strong>.<\/p>\n\n\n\n

The firm also noted that the allowance once covered approximately five months<\/strong> of wages for the average British man and nearly eight months<\/strong> of earnings for the average British woman. In current terms, it amounts to roughly one month\u2019s salary. Duncan Mitchell-Innes <\/a>of TWM Solicitors said the allowance was originally designed to help families pass on \u201cmeaningful gifts\u201d without creating a future inheritance tax burden.<\/p>\n\n\n\n

\u201cIn 1981, families could gift enough for a house deposit or even a brand-new Mini tax free<\/em>,\u201d he said. \u201cToday, the same allowance barely covers the cost of replacing an average boiler<\/em>.\u201d According to the legal firm, there is currently no indication that the Government plans to raise the threshold in line with inflation.<\/p>\n\n\n\n

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Few estates will ever pay Inheritance Tax, but if you're likely to be one of them, there are ways you can plan ahead to legally reduce the bill.

'Gifting' is a way to pass on your money while you're still alive \u2013 here are the rules you need to know:https:\/\/t.co\/7kxSu8Lh8u<\/a><\/p>— MoneySavingExpert (@MoneySavingExp) March 15, 2026<\/a><\/blockquote>