Inheritance Tax (IHT) continues to make headlines – but not because of dramatic rule changes. Instead, it’s steadily creeping up on more families each year.
Latest figures show IHT receipts have reached £8.5bn for the 2025/26 tax year, a rise on the previous year and part of a long-term upward trend. What’s driving this isn’t necessarily new taxes, but something far simpler: frozen thresholds.
The core allowance – known as the nil-rate band – has been stuck at £325,000 since 2009. For many, this can rise to £500,000 when passing a home to children or grandchildren. However, with property prices and investment values increasing over time, more estates are naturally drifting above these limits.
In effect, this creates what’s often called a “stealth tax”. Even modest growth in asset values can lead to a larger IHT bill, without any change in tax rates.
There are also some important changes on the horizon. From April 2027, unused pension funds are expected to be included within an estate for IHT purposes. This could significantly alter how pensions are used in long-term planning, as they have historically been an efficient way to pass on wealth.
In addition, changes to Business and Agricultural Property Reliefs are beginning to take effect, introducing limits to the amount that can benefit from full relief. For some families, particularly those with business or land assets, this may require a rethink.
Interestingly, while IHT receipts are still rising, the pace of growth may be slowing slightly. This is partly due to a cooling property market in some areas, particularly in London and the South East. However, the overall direction remains clear – more estates are being caught over time.
The key takeaway is simple: IHT is no longer just a concern for the very wealthy, and the new pension rules will accelerate this significantly in future years.
Planning ahead can make a significant difference. Reviewing your Will, considering gifting strategies, and making full use of available allowances can all help ensure more of your wealth passes to the people you care about.
If it’s something you haven’t revisited recently then now is a good time to start the conversation, because the earlier you start to think about it, the more likely you are to be able to make a significant difference.
If you would like to understand how your estate will be affected by the new rules, or simply want to look at ways of making your estate more tax-efficient, then please get in touch.
