Alexander Grace Chartered Financial Planner

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Stealth Tax Part 1: Inheritance Tax

The UK feels as though it is at a crossroads and many of us are feeling the effects of this. After living through the uncertainty of Covid in 2020 and 2021, 2022 was a year in which we would get back on track and move forward as a nation.

2022 didn’t get the memo. Putin’s war is entering its seventh month; Boris Johnson resigning and a power struggle emerging within the government; inflation soaring to 40 year highs, currently sitting at 10.1%; and of course the energy crisis that we are facing where prices have increased significantly, with many people fearing the changes that are expected in October.

However, sitting in the shadows are other events (or perhaps non-events) that impact many of us; I’m talking about “Stealth Tax”.

What do we mean by “Stealth Tax”?

“Stealth Tax” is a general term used for changes, or lack of changes, that go largely unnoticed but can end up having a significant impact on individuals and businesses.

Usually this comes in the form of “freezes”, where thresholds remain the same for long periods of time, despite increases in other areas of our financial lives, such as inflation, national earnings and house prices.

Stealth tax can form part of a strategy to generate much needed revenue for the country to balance concessions made in other areas and is not a new concept.

From our professional experience, we are seeing more and more clients impacted by breaching thresholds which a decade ago would have seemed unimaginable. Over the course of the month, we will be looking to post a series of blogs on Stealth Tax and how it has been implemented over the years.

“I’m not wealthy enough to worry about Inheritance Tax”

Inheritance Tax (IHT) is a levy on the estate of the deceased if above a certain threshold, known as the Nil Rate Band. The threshold varies dependent on your circumstances (i.e. married/civil partnership, children etc) but for all intents and purposes, it is £325,000 per person. What this means is that if your estate is valued at over £325,000 at the time of death, your estate may be liable for inheritance tax.

It is a common misconception that IHT is for the rich. A decade ago, that statement was more valid than it is today, but unfortunately the Nil Rate Band has remained the same since 2009. As per the UK house price index, the average house price in England, as at June 2009, was £164,536. Fast forward to June 2022, this is now sitting at £304,867 – an increase of 85.28%. This is driving the “paper wealth” of many people and a key factor in why we are seeing more IHT receipts today than in previous years. This trend likely to continue, especially as the Nil Rate Band is frozen until 2026.

In 2017, the Main Residence Nil Rate Band was introduced for those who wanted to pass on their property to their children, however, this is capped at £175,000 per person and is not inclusive of everyone who owns a property.

In most cases IHT is easily mitigated with forward planning, yet it is not something that is often addressed. A study by Canada Life has stated that only 20% of people with a liability have actually taken any action, whilst only 7% of those who have taken action have not sought professional advice. From personal experiences with clients, control and access are key reasons for not acting on the liability, but this could be misguided as this can still be factored into their objectives.

In our next blog…

We will be looking at how stealth tax has an impact on your income, considering the thresholds, tapering of your personal allowance and potential impact on benefits.

Are you likely to be caught out by stealth tax?

At Alexander Grace, we want to help people to understand their financial position and put them in a better place. Your money matters to you and therefore it matters to us to ensure you make the most of it. With much of the events of the world today, stealth tax isn’t particularly forthcoming, and it can become increasingly difficult to monitor your own position. As Independent Financial Planners, we can help you to build a tax efficient strategy, helping to preserve and grow your money in line with those important financial objectives for you and your family.


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Past performance is not a guide to future performance. The value of investments and the income from them can go down as well as up and investors may not get back the amount invested. This information does not constitute investment advice and should not be used as the basis of any investment decision, not should it be treated as a recommendation for any investment. Although endeavours have been made to provide accurate and timely information, we cannot guarantee that such information is accurate at the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough review of their situation. We cannot accept responsibility for any loss as a result of acts or omissions.

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