{"id":23834,"date":"2022-12-15T11:09:53","date_gmt":"2022-12-15T11:09:53","guid":{"rendered":"https:\/\/smh.group\/?p=23834"},"modified":"2022-12-15T11:09:53","modified_gmt":"2022-12-15T11:09:53","slug":"the-effects-of-fiscal-drag-on-your-tax-position","status":"publish","type":"post","link":"https:\/\/devstagesite.co.uk\/smhgroup\/the-effects-of-fiscal-drag-on-your-tax-position\/","title":{"rendered":"The effects of fiscal drag on your tax position"},"content":{"rendered":"

Fiscal drag is the stealthy way in which governments pull more and more taxpayers into higher tax brackets without the backlash that comes with increased tax rates. This is something taxpayers can probably live with when inflation is negligible, but it\u2019s another matter entirely with inflation at over 11%.<\/strong><\/p>\n

Inheritance tax<\/strong><\/h2>\n

One of the starkest examples of fiscal drag is the freezing of the inheritance tax (IHT) nil rate band that has been set at \u00a3325,000 since April 2009. Combined with soaring property prices, it is no surprise the government\u2019s IHT receipts have nearly doubled in the ten years to 2021\/22, with current year receipts set to see a further significant increase.<\/p>\n

The nil rate band had previously been frozen at \u00a3325,000 until 2026, but the Autumn Statement has now extended the freeze until 2028.<\/p>\n

IHT bills can sometimes be mitigated with careful lifetime planning, although people should be careful not to leave themselves short of funds later in life.<\/p>\n

Income tax thresholds <\/strong><\/h2>\n

The personal allowance (\u00a312,570) and the basic rate tax threshold (\u00a337,700) are unchanged since 2021\/22, and, like the IHT nil rate band, are now set to remain frozen until 2028. Other thresholds are subject to fiscal drag because the government simply ignores them from year to year.<\/p>\n