Over the next few years, more estates could become subject to Inheritance Tax (IHT).

In 2022/23, MoneyWeek reports that 4.62% of deaths triggered an IHT bill. By 2029/30, this figure is expected to double to 9.5%.

A variety of changes are pushing more estates over the tax-free threshold and into the IHT net. From legislative changes to rising asset values, these forces could see a larger portion of your wealth end up in the hands of HMRC.

However, in some cases, you may be able to leave more to your chosen beneficiaries by creating a comprehensive estate plan that mitigates your IHT liability.

Read on to discover the four reasons more estates may face an IHT bill in the years ahead and the steps you could take now to mitigate your liability.

1.    The nil-rate bands are frozen until 2031

Generally, you can leave behind a certain amount of your estate without paying IHT. This amount is known as your nil-rate band.

As of 2026/27, the nil-rate band is £325,000. You may also benefit from a residence nil-rate band of up to £175,000 if you leave a primary residence to a direct descendant, potentially bringing your tax-free allowance to a total of £500,000.

Each person has their own nil-rate band, meaning couples who are married or in a civil partnership could potentially leave up to £1 million to the next generation without triggering an IHT bill.

Once your estate exceeds your nil-rate band, the portion of your wealth over the threshold is typically taxed at 40%.

Prior to 2009, the nil-rate band increased each year to account for inflation. However, as of April 2026, this hasn’t changed in 17 years and is set to remain frozen until at least 2031. Likewise, the residence nil-rate band was first frozen in 2020 and isn’t expected to change until 2031.

Had the thresholds grown in line with the Consumer Prices Index (CPI), AJ Bell forecasts that, by 2029, the nil-rate band would have been around £550,000 and the residence nil-rate band would have risen to around £240,000. As such, an individual could have passed on a maximum of £790,000 tax-efficiently, and a married couple could have passed on nearly £1.5 million.

Ultimately, your estate could be liable for IHT on an additional £290,000 of its value in 2029 due to the frozen thresholds. If taxed at the standard rate of 40%, your IHT bill could be £116,000 higher than if the nil-rate bands had risen with inflation.

2.     The value of certain assets and your income are likely to rise over time

Depending on your assets, the value of your estate may be growing with inflation. For example, an item priced at £1,000 in 2006 could be worth over £1,750 in 2026 due to inflation alone (not accounting for any other factors impacting the item’s value), according to the Bank of England’s inflation calculator.

What’s more, many employers offer inflationary pay rises to help prevent your income from being eroded by rising costs. According to the Office for National Statistics (ONS), the annual growth for average regular earnings was 4.6% in the period from August to October 2025.

With the nil-rate bands frozen, this could mean your estate outpaces the tax-free threshold without you becoming any wealthier in real terms.

3.    Property values are rising

The UK housing market has seen property values soar in recent years. According to ONS, the average house price was £218,000 in 2016. But ONS data shows the average had risen to £268,000 by January 2026.

As such, if you own one or more properties, the value of your estate is likely growing over time.

Not only could this mean a larger portion of your wealth could exceed the frozen nil-rate bands, but it could also result in a reduced tax-efficient allowance.

The residence nil-rate band begins to taper once the value of your estate exceeds £2 million. For every £2 your estate surpasses £2 million, the residence nil-rate band reduces by £1. Once your estate reaches £2.35 million, you lose your full residence nil-rate band.

This threshold has remained frozen since it was originally set in 2017, meaning more estates could see their tax-efficient allowance taper as property values rise.

4.     Pensions will be subject to Inheritance Tax from April 2027

In 2026/27, any funds remaining in your pension when you die will typically be passed to your chosen beneficiary without being subject to IHT.

However, from April 2027, new legislation will see most unused pension funds included in estates for IHT purposes.

Depending on the size of your estate, this change could mean your wealth becomes subject to IHT for the first time, or a larger portion of it will be taxed. In fact, as a direct result of the legislation, Pensions Age reports that around 10,500 estates will become liable for IHT in 2027/28, while 38,500 will face higher bills.

In some cases, this could even lead to your pension being taxed twice. Not only may it be subject to IHT, but your beneficiary could be charged Income Tax when they access the funds, potentially resulting in HMRC receiving a larger portion of your pension than your loved ones.

Mitigate your Inheritance Tax bill with comprehensive estate planning

Fortunately, there are ways for you to pass on wealth to your loved ones while mitigating your estate’s IHT liability. For example, you might consider.

  • Gifting wealth in your lifetime: Provided you give the gift more than seven years before your death, or it qualifies for an exemption, the value will be excluded from your estate for IHT purposes.
  • Placing assets in trust: Some trusts allow you to pass on assets tax-efficiently. However, the rules for paying IHT and accessing the funds vary depending on the type of trust, so it’s often worth seeking advice before making any irreversible decisions.
  • Sharing nil-rate bands with your partner: If you’re married or in a civil partnership, unused nil-rate bands can be transferred to the surviving partner, bringing the combined nil-rate band up to £1 million if you qualify for the full residence nil-rate band. IHT is not charged on assets left to a spouse or civil partner.

The options for mitigating your IHT bill can be complex, especially with the rules continuing to change. The most effective strategy for you will depend on your circumstances, including the assets within your estate and your wishes for distributing them. A financial planner can help you ascertain appropriate methods of reducing your estate’s IHT liability.

Get in touch

If you’re worried about your estate triggering an IHT bill after you die, get in touch to find out how we could help you create a tax-efficient estate plan to pass more of your wealth to loved ones.

Email info@doddwealthcare.co.uk or call 01228 530913 / 01768 864466 to learn more about how we can help.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, trusts, or tax planning.