“As more families are finding out, without careful estate planning, inheritance tax has the potential to reduce the value of a legacy significantly.”
Jack Rose
Head of Distribution, Triple Point
4% of estates currently pay IHT, by 2028 this is expected to rise to 7%²
Forecast IHT receipts in 2025/26³
Projected IHT receipts by 2030/31⁴
What does this mean in practice for clients? See how these trends are playing out in client scenarios, shaped with input from advisers.
1. Irwin Mitchell, June 2025; 2. OBR, May 2025; 3. OBR’s economic and fiscal outlook, Nov 2025
The key facts about inheritance tax
Inheritance tax (IHT) is a tax that may be charged on the value of someone’s estate when they die. An estate typically includes property, savings, investments and personal possessions, minus any debts.
IHT is charged at 40% on the value of the estate over the tax-free allowance (known as the nil-rate band) of £325,000.
The amount of IHT to be paid depends on several factors, the total value of an estate, and who it is left to.
Married couples, or those in a civil partnership, can leave their entire estate to their spouse/partner free from IHT. This doesn’t affect the individuals nil-rate band, which means when the second spouse/partner dies, their estate could benefit from both tax-free allowances, potentially up to £650,000 before any IHT is due.
Widows may still benefit from the partner’s unused allowance, provided they left everything to their spouse. Unmarried couples do not have the same treatment.
The residence nil-rate band (RNRB) reduces the amount of IHT paid when passing on the family home to direct descendants (children, including foster and stepchildren, or grandchildren). The RNRB is currently £175,000 – no IHT is due on the value of a property under this threshold.
The combined NRB and RNRB means an estate could be worth up to £500,000 before any IHT is due. As with the standard allowance, married couples and civil partners can transfer any unused residence nil-rate band between them, provided the estate was left in full to the surviving spouse. This means a surviving spouse could pass on up to £1 million IHT-free, if the family home goes to direct descendants.
The residence nil-rate band starts to taper for estates worth more than £2 million. For every £2 over that threshold, £1 of the residence nil-rate band is lost. This tapering is based on the total value of the estate, not just the value of the home.
Why more estates are paying inheritance tax
People are living longer
Longer lives and higher asset values mean people save and invest for longer, so estates are larger and more likely to cross IHT thresholds as wealth builds over time.
House prices have soared
Average UK house prices are around three-and-a-half times their 2000 level. This growth in value means even modest properties can push the value of an estate into scope for IHT.
Frozen tax thresholds
The nil-rate band and the residence nil-rate band have been frozen since 2009, meanwhile asset prices have risen in line with inflation.
Our Essential Guide to IHT
Help clients get to grips with IHT with this guide, approved for retail investors. It covers key facts, has a checklist for calculating the size of an estate, and suggests different ways to reduce a potential IHT bill.
Fully updated for 2026, including impacts on Business Relief and pensions.
IHT treatment of pensions is changing
At present, most private pensions fall outside estates for IHT calculations.
But this is changing from April 2027, any unspent pension pots may be included in the value of the estate and potentially subject to IHT.
ESTATE planning
Planning for inheritance tax
IHT planning is about understanding what may be included in an estate and using the options available to reduce exposure, where it makes sense. Here are some of the most common approaches.
Trust planning
Trusts let you control who benefits, when, and how assets are used. Useful for supporting children and protecting family wealth.
Trusts are complex and can trigger tax on setup, at certain milestones, and on distributions. In some cases they’re treated like lifetime gifts depending on timing and value.
Gifting
Lifetime gifts can reduce an estate, subject to rules. Everyone has an annual exemption of up to £3,000 each tax year as well as small gifts of up to £250 per person.
Larger gifts are deemed potentially exempt transfers (PETs) and may fall outside the estate if the giver lives seven years. Exemption when death occurs within seven years may be tapered.
Spending
One straightforward way to reduce IHT exposure is to reduce the value of an estate by spending – for example on lifestyle, experiences, or planned support for family.
Life insurance
Life insurance doesn’t reduce the IHT due on an estate, but it may provide funds to help pay an IHT bill when it’s due.
If a policy is written in trust, the payout will usually fall outside the estate (if set up correctly).
Charities
Gifts to registered charities are IHT-free.
And if at least 10% of the net estate is left to charity, the estate may qualify for a reduced IHT rate of 36% instead of 40%.
Business Relief
Business Relief may reduce IHT by treating qualifying business assets as outside the estate. Shares typically must be held for two years and still held at death.
From April 2026 100% relief applies to the first £2.5 million of qualifying unquoted shares, with 50% relief on any qualifying value above £2.5 million. Qualifying AIM shares attract 50% relief.
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