The UK's inheritance tax (IHT) system has been branded an "ageist lottery" that creates stark inequalities based purely on when beneficiaries inherit, according to new analysis. The controversial levy is hitting younger heirs disproportionately hard, creating a generational divide in death duties.
A System Stacked Against the Young
Experts have uncovered a fundamental flaw in how the tax is applied. The current nil-rate band threshold of £325,000 has been frozen until 2028, despite soaring property prices pushing more ordinary families into the tax net. This static threshold means those who inherit younger, often when property values are lower relative to their lifetime, face a significantly higher effective tax rate.
"It's a brutal double whammy," explains one financial planner. "Younger people inherit at a life stage when they may need the money most – for a mortgage deposit or starting a family – but the taxman takes a larger chunk simply because of their age."
The Postcode Lottery Deepens
The problem is exacerbated by the UK's property market variations. An heir inheriting a modest family home in the Southeast could easily breach the IHT threshold, while someone inheriting a larger property in the North might not. This geographic unfairness compounds the age-based disparity.
What Makes the System 'Ageist'?
- Frozen Thresholds: The IHT nil-rate band has been static since 2009, failing to keep pace with inflation.
- Property Inflation: Rising house prices drag more estates over the threshold year on year.
- Life Stage Impact: A £50,000 tax bill has a far greater impact on a 35-year-old than a 70-year-old retiree.
- Lost Opportunities: Younger heirs lose the compounding growth potential of inherited wealth.
Calls for Radical Reform
Campaigners are demanding urgent government action to modernise what they call an "archaic" system. Proposed solutions include linking the nil-rate band to regional property prices or introducing tiered thresholds based on the beneficiary's age.
"This isn't about protecting the wealthy," insists a representative from a intergenerational fairness charity. "It's about ensuring a fair system for hard-working families passing on modest homes and life savings. The current rules are arbitrary and punitive."
With more families unexpectedly facing inheritance tax bills, the pressure is mounting on Westminster to address what many see as one of Britain's most unjust taxes.
