Will Inheritance Tax Be Abolished in the UK? Our Expert Insights

The question of whether inheritance tax (IHT) will ever be abolished in the UK comes up constantly — and it’s understandable. With the nil rate band frozen at £325,000 since 2009 and average house prices in England now sitting around £290,000, ordinary homeowners are increasingly caught by a tax that was originally designed for the wealthy. Recent political discussions have brought the issue into sharper focus, but the reality is that no government has shown a serious willingness to give up the billions IHT generates each year.

At MP Estate Planning, founded by Mike Pugh, we believe in a straightforward approach: plan, don’t panic. Rather than waiting for politicians to act, we help families take practical steps right now to protect their estates using the tools that English law has provided for over 800 years — lifetime trusts, strategic gifting, and proper use of allowances.

Key Takeaways

• The nil rate band has been frozen at £325,000 since 2009 and is confirmed frozen until at least April 2031 — meaning more families are pulled into the IHT net every year as property values rise.
• IHT currently raises over £7 billion annually for the Treasury, making full abolition politically unlikely regardless of which party is in power.
• The combined IHT-free allowance for a married couple leaving their home to direct descendants can reach £1,000,000 — but only with proper planning.
• Lifetime trusts, strategic gifting, and regular estate reviews are the most effective tools available today to reduce your family’s IHT exposure.
• Waiting for reform is a gamble — the families who act now are the ones whose legacies are protected.

Understanding Inheritance Tax in the UK

IHT legislation can seem daunting, but the core concept is actually quite simple: when you die, HMRC adds up the value of everything you own, deducts certain exemptions and reliefs, and charges 40% on whatever exceeds your available nil rate band. The complexity lies in the exemptions, allowances, and planning strategies — and that’s where specialist guidance makes all the difference.

What is Inheritance Tax?

Inheritance tax is a charge levied on the estate of a deceased person. Your “estate” includes your property, savings, investments, personal possessions, and — from April 2027 — the value of any inherited pensions. The tax is charged at 40% on the value of the estate above the nil rate band (NRB), which is currently £325,000 per person. This rate reduces to 36% if you leave at least 10% of your net estate to charity.

The NRB has been frozen at £325,000 since 6 April 2009 — that’s over 16 years without any increase. It is confirmed frozen until at least April 2031. Meanwhile, the average home in England is now worth around £290,000. This freeze is the single biggest reason why families who would never have considered themselves wealthy are now facing an IHT bill.

There is also a Residence Nil Rate Band (RNRB) of up to £175,000 per person, available when a qualifying residential property is passed to direct descendants (children, grandchildren, or step-children). It is not available when property is left to nephews, nieces, siblings, friends, or charities. Like the NRB, the RNRB is frozen until April 2031.

Who needs to pay it?

IHT is paid by the executors or personal representatives of the estate before assets are distributed to beneficiaries. Crucially, IHT must be paid before a Grant of Probate is issued — which means the family often needs to find the cash before they can access the deceased’s bank accounts or sell the property. This can create real financial pressure, and it’s one of the reasons why placing life insurance into trust is such a valuable planning step.

While HMRC data shows that only around 4-6% of estates currently pay IHT, that percentage is rising year on year as the frozen thresholds fail to keep pace with property values. Projections suggest the number of families caught will continue to grow, with IHT receipts forecast to reach over £8 billion by the end of the decade. You don’t need to be a millionaire to face an IHT bill — if you own a home in the south of England and have some savings, you may already be over the threshold.

For those concerned about the impact of IHT on their estate, planning early is essential. You can find more information on inheritance tax planning to help protect your family from unnecessary tax bills.

Recent statistics and trends

The trend is clear and consistent: IHT receipts have been climbing steadily. In the 2023-24 tax year, HMRC collected over £7.5 billion in IHT — a record. This is driven by three main factors: rising property values, the frozen nil rate band, and an ageing population with accumulated wealth in housing and pensions.

From April 2026, Business Property Relief (BPR) and Agricultural Property Relief (APR) will be capped at 100% for the first £1 million of combined business and agricultural property, with only 50% relief on the excess. From April 2027, inherited pensions will also fall within the scope of IHT. These changes mean that even more estates will face IHT charges in the coming years.

Understanding these trends and the current inheritance tax exemptions is essential for making informed decisions. The families who plan ahead — using lifetime trusts, gifting strategies, and proper use of allowances — are the ones who keep their wealth intact. As Mike Pugh puts it: “Trusts are not just for the rich — they’re for the smart.”

The Current Landscape of Inheritance Tax

To plan effectively, you need to understand exactly how the current IHT system works. The rules aren’t complicated once you break them down — the problem is that most people don’t discover them until it’s too late.

The headline rate is 40% on the taxable estate above the nil rate band. But within that framework, there are several allowances and exemptions that can significantly reduce — or even eliminate — your family’s IHT bill, provided they’re used correctly.

How much is currently payable?

The amount of IHT payable depends on the total value of the estate and which allowances are available. The two key allowances are the nil rate band (NRB) of £325,000 and the residence nil rate band (RNRB) of up to £175,000. Both are transferable between spouses and civil partners, meaning a married couple can potentially pass on up to £1,000,000 before any IHT is due.

However, the RNRB comes with important conditions. It only applies when you leave a qualifying residential property to direct descendants — that means children, grandchildren, or step-children. If you leave your home to a sibling, a nephew, a friend, or a charity, the RNRB is not available. The RNRB also tapers away by £1 for every £2 of estate value above £2,000,000, disappearing entirely for estates worth £2,350,000 or more.

Exemptions and Allowances

Several exemptions and allowances can reduce the IHT liability on your estate. The most important ones include:

• Spouse and civil partner exemption: Transfers between spouses or civil partners are completely exempt from IHT, with no upper limit. This is one of the most valuable exemptions in the entire tax system.
• Charitable donations: Gifts to registered charities are IHT-exempt. If you leave at least 10% of your net estate to charity, the IHT rate on the rest reduces from 40% to 36%.
• The 7-year rule (Potentially Exempt Transfers): Gifts to individuals are potentially exempt transfers (PETs). If you survive for 7 years after making the gift, it falls entirely outside your estate. If you die within 7 years, the gift uses up your NRB first, with any excess taxed at 40%. Taper relief may reduce the tax payable between years 3 and 7, but only where gifts exceed the NRB. It’s important to note that PETs only apply to outright gifts to individuals — transfers into discretionary trusts are chargeable lifetime transfers (CLTs), which are treated differently.
• Annual gift exemption: You can give away £3,000 per tax year free of IHT, with one year’s carry-forward if unused. Small gifts of up to £250 per recipient per year are also exempt (but cannot be combined with the £3,000 for the same person).
• Wedding gift exemptions: Parents can give up to £5,000 per child on marriage, grandparents up to £2,500, and anyone else up to £1,000 — all free of IHT.
• Normal expenditure out of income: Regular gifts made from surplus income — not capital — are exempt from IHT, provided they don’t affect your standard of living. This must be documented carefully, but it has no upper limit and is one of the most powerful exemptions available.

Understanding and using these exemptions is one of the most effective ways to reduce your family’s IHT exposure. The key is planning ahead — many of these reliefs require time to be effective, particularly the 7-year rule for lifetime gifts.

Who benefits from the current system?

The current system benefits those who plan. Married couples who understand the transferable NRB and RNRB can shelter up to £1,000,000 from IHT. Families who make use of lifetime gifting, annual exemptions, and trusts can significantly reduce their taxable estate over time.

Conversely, the current system disproportionately catches those who don’t plan — particularly homeowners who have seen their property values rise well above the NRB without realising the IHT implications. With the NRB frozen since 2009 and average property values continuing to climb, more ordinary families are being drawn into the IHT net each year. Staying informed about government inheritance tax plans and reviewing your estate regularly is the only way to stay ahead.

Proposed Changes and Reforms

The question of whether IHT should be reformed — or abolished entirely — generates strong opinions on all sides. In recent years, there have been notable discussions in Parliament and the media about the future of this tax. Here’s where things stand.

Recent Parliamentary Discussions

There have been significant discussions within the UK Parliament regarding potential IHT reform. Some Conservative MPs have historically called for abolition as a manifesto pledge, while the Labour government elected in 2024 moved in the opposite direction — tightening reliefs on business property, agricultural property, and pensions rather than loosening the rules.

The Autumn Budget 2024 introduced the cap on BPR and APR from April 2026 (100% relief limited to the first £1 million, then 50%) and confirmed that inherited pensions will be brought within the scope of IHT from April 2027. These are the most significant IHT changes in a generation — and they expand the tax’s reach rather than reducing it.

The reality is that IHT now generates over £7.5 billion per year for the Treasury. Any government proposing abolition would need to explain how it plans to replace that revenue, which makes full abolition an extremely difficult political proposition regardless of which party is in power.

Public Opinion on Inheritance Tax Abolition

Public opinion on IHT is genuinely divided. Many people instinctively dislike the idea of being taxed on wealth that has already been taxed during their lifetime — income tax on earnings, stamp duty on property purchases, council tax annually. Being taxed again at death feels like a fourth bite at the same cherry.

On the other hand, proponents of IHT argue it promotes social mobility and prevents the indefinite concentration of wealth. Surveys consistently show that while a majority support the principle of reform, there’s less consensus on what reform should look like. Some want higher thresholds, others want lower rates, and a vocal minority want abolition altogether.

What’s clear is that public dissatisfaction with IHT is growing as more ordinary families are affected — not because they’ve become wealthy, but because the frozen thresholds haven’t kept pace with rising house prices.

Other Countries’ Approaches

Looking internationally provides useful context. Some countries have abolished their equivalent of inheritance tax entirely. Sweden abolished it in 2005, and Australia, Canada, and New Zealand have no general inheritance tax. Others, like France and the United States, maintain it but with very different thresholds and structures.

The UK’s threshold is strikingly low compared to the United States, where only the very wealthiest estates pay. In the UK, a family with a modest home in the south of England and some savings can face a significant IHT bill — something that simply wouldn’t happen under the US system.

Understanding these international comparisons is useful context — but we can’t control what Parliament does. What we can control is whether our own families are protected using the tools already available under English law. England invented trust law over 800 years ago, and those tools remain the most effective defence against IHT today.

The Arguments for Abolishing Inheritance Tax

There are legitimate arguments for abolishing IHT, and they deserve honest examination. Whether or not abolition is politically realistic, understanding these arguments helps explain why the debate continues to generate strong public feeling.

Simplifying Estate Planning

One of the strongest arguments for abolition is simplicity. The current IHT system is layered with thresholds, exemptions, taper relief rules, and complex interactions between the NRB, RNRB, PETs, CLTs, and the relevant property regime for trusts. This complexity means that families without specialist advice often fail to use the allowances available to them — or make costly mistakes.

Key arguments for simplification include:

• Families dealing with bereavement shouldn’t also need to navigate complex tax rules during a difficult time
• The frozen thresholds and layered allowances create a system where tax planning has become a necessity rather than a choice
• The administrative burden on executors and personal representatives adds to probate delays, which already typically take 3-12 months for the full process

Encouraging Wealth Transfer

Abolishing IHT could encourage families to pass on wealth more freely to the next generation. Currently, the 40% rate acts as a significant deterrent, and the 7-year rule for gifts means that many people feel they must give away their assets while they’re still relatively young and healthy — or risk their children losing nearly half to tax.

The potential benefits of freer wealth transfer include:

• Younger generations receiving capital at a time when they most need it — for housing deposits, starting businesses, or supporting their own families
• Reduced reliance on complex planning structures that are only accessible to those who can afford professional advice
• Keeping family wealth within the family, which — as Mike Pugh says — “strengthens the country as a whole”

Economic Implications

The economic arguments cut both ways. Abolition advocates point to studies suggesting that IHT distorts investment decisions — for example, business owners may structure their affairs primarily to qualify for Business Property Relief rather than for commercial reasons. Removing IHT could encourage more efficient allocation of capital.

Potential economic outcomes include:

• Increased consumer spending as younger generations inherit more capital
• Reduced distortion of business and investment decisions currently driven by IHT planning
• A significant loss of government revenue (currently over £7.5 billion per year) that would need to be replaced through other means

The economic case for abolition is not clear-cut, which is precisely why the debate continues. What is clear is that families cannot afford to wait for politicians to resolve it. The tools to protect your estate exist now — the question is whether you use them.

The Case Against Abolishing Inheritance Tax

While the arguments for abolition have emotional appeal, there are substantial reasons why IHT is likely to remain in some form. Understanding both sides of the debate helps you plan realistically rather than hoping for a change that may never come.

Funding Public Services

IHT generates over £7.5 billion annually for the Treasury, and that figure is rising. This revenue funds NHS services, schools, social care, infrastructure, and defence. Abolishing IHT would leave a significant hole in public finances that would need to be filled — most likely through increases to income tax, VAT, or other taxes that would affect everyone, not just those with larger estates.

• The NHS and social care system
• Education and schools
• Social welfare and state pension support
• Infrastructure and public services

No Chancellor — regardless of political party — has found it easy to justify writing off billions in annual revenue, which is why every government since 1986 has kept IHT in place, even when promising reform.

Fairness and Equality Considerations

Supporters of IHT argue it promotes social mobility by preventing unlimited inter-generational wealth accumulation. The current system does include targeted reliefs that aim to make the tax fairer for certain groups:

The counter-argument, of course, is that IHT in practice catches the “asset-rich but cash-poor” — families whose wealth is tied up in their home rather than liquid investments. A family in the south of England with a home worth £400,000 and modest savings faces a genuine IHT bill, while the genuinely wealthy often have access to sophisticated planning that reduces their liability significantly.

The Impact on Government Revenue

The potential loss of over £7.5 billion per year from abolishing IHT would require difficult choices. To put this in perspective, that amount is roughly equivalent to the annual budget for a mid-sized government department. Replacing it would likely mean:

• Increasing income tax rates or reducing personal allowances
• Raising capital gains tax rates or removing reliefs
• Reducing spending on public services

Government inheritance tax plans are shaped by this fiscal reality. The current government has chosen to expand IHT’s reach (through BPR/APR caps and pension inclusion) rather than reduce it — suggesting that abolition is not on the horizon. This is precisely why families should focus on what they can control: using legitimate planning tools to protect their own estates.

Potential Alternatives to Inheritance Tax

While full abolition seems unlikely, there has been genuine academic and political discussion about alternative approaches. Understanding these helps frame the debate and highlights why the current system, despite its flaws, may persist in some form for decades to come.

Suggestions from Tax Experts

One frequently discussed alternative is replacing IHT with a capital gains tax charge on death. Currently in the UK, capital gains tax is not charged on death — the assets are instead “uplifted” to their market value at the date of death, and IHT applies to the whole estate. Replacing IHT with a CGT charge on death would tax the growth in value during the deceased’s lifetime, rather than the total value of the estate.

This approach would generate less revenue than IHT (since CGT rates are lower and would only apply to gains, not total values), but proponents argue it would feel fairer — you’d only be taxed on wealth you hadn’t already been taxed on. However, it would create significant complexity around calculating the original acquisition cost of assets held for decades, particularly family homes.

Any fundamental change to the system would require a transition period and would affect existing inheritance tax planning strategies. This is another reason not to delay planning — whatever changes come, families who have already protected their assets through trusts and gifting will be in a stronger position.

Incremental Reforms versus Complete Abolition

The choice between incremental reform and complete abolition is fundamentally a political question. Incremental reforms are far more likely, and we’ve already seen them in action — the introduction of the RNRB in 2017, the freezing of thresholds, and the 2024 Budget changes to BPR, APR, and pensions.

• Incremental Reforms: Adjusting thresholds (perhaps unfreezing the NRB), revising reliefs, or introducing a lower rate with a broader base. These are politically manageable and don’t require replacing billions in revenue.
• Complete Abolition: Would require either significant spending cuts or replacement taxation. No major UK political party currently has this as active policy, despite occasional backbench calls for it.

Innovative Taxation Models

Some think tanks have proposed more radical alternatives, including a “capital receipts tax” — where recipients of inheritances are taxed on what they receive, rather than the estate being taxed as a whole. This could be more progressive, as recipients with smaller inheritances would pay less than those receiving large amounts. Other suggestions include annual wealth taxes or a more comprehensive system of lifetime gift taxation.

While these models are intellectually interesting, none has gained sufficient political traction to be considered for implementation. The practical reality for UK families is that IHT in broadly its current form is likely to remain for the foreseeable future — and the trend is towards expanding it, not shrinking it. The smart response is to plan accordingly using the tools available today.

The Role of Legal Experts in Estate Planning

Protecting your family’s wealth isn’t something you should attempt without specialist guidance. As Mike Pugh puts it: “The law — like medicine — is broad. You wouldn’t want your GP doing surgery.” Estate planning, and IHT planning in particular, is a specialist discipline that requires detailed knowledge of trust law, tax legislation, and how the two interact.

Importance of Professional Guidance

A general-practice solicitor may be competent at writing a basic will, but IHT planning requires a different level of expertise. The interaction between the NRB, RNRB, PETs, CLTs, the relevant property regime for trusts, the gift with reservation of benefit rules, and pre-owned assets tax creates a web of considerations that require specialist knowledge.

At MP Estate Planning, we use our proprietary Estate Pro AI software — a 13-point threat analysis system — to identify every potential risk to your estate, from IHT exposure to care fee vulnerability, sideways disinheritance, and probate delays. This comprehensive approach ensures nothing is missed.

Planning Strategies to Minimise Tax Liability

Effective IHT planning goes far beyond writing a will. The most powerful strategies available to UK families include:

• Lifetime trusts: Transferring your home or other assets into a properly structured discretionary trust can protect them from IHT, care fees, divorce, and probate delays — while you continue to live in the property. Discretionary trusts are the most common type used in estate planning, giving trustees flexibility over distributions while ensuring no single beneficiary has a fixed right that could be targeted by creditors or divorcing spouses. A trust is a legal arrangement — not a separate legal entity — where the trustees hold legal ownership of the assets for the benefit of the beneficiaries.
• Strategic gifting: Using the 7-year rule for PETs, annual exemptions (£3,000 per year), small gift exemptions (£250 per recipient), wedding gift exemptions (£5,000 from a parent, £2,500 from a grandparent), and normal expenditure out of income to gradually reduce your taxable estate.
• Life insurance trusts: Placing a life insurance policy into trust means the payout goes directly to your beneficiaries outside your estate, avoiding the 40% IHT charge. This is typically free to set up and is one of the simplest planning steps a family can take.
• Maximising the RNRB: Ensuring your will is correctly structured so that your qualifying residential property passes to direct descendants, securing the additional £175,000 per person (£350,000 for a couple).

Common Pitfalls to Avoid

Without specialist guidance, estate planning can go wrong in ways that are expensive and sometimes irreversible. Common mistakes we see include:

• Failing to update your will after major life events — a divorce, remarriage, birth of a grandchild, or change in asset values can all undermine your existing plans. In England and Wales, marriage automatically revokes a will unless it was made in contemplation of that marriage.
• Making gifts without understanding the gift with reservation of benefit rules — if you gift your home to your children but continue to live in it rent-free, HMRC treats it as still part of your estate. The gift achieves nothing for IHT purposes. A properly structured trust avoids this trap.
• Assuming a basic will is sufficient — a will alone cannot protect against care fees, sideways disinheritance, or your beneficiaries’ divorce. Only a trust can provide these protections. A will also goes through probate, which means delays, asset freezing, and your will becoming a public document that anyone can obtain a copy of.
• Waiting too long to plan — the 7-year rule for gifts, the deprivation of assets rules for care fees, and the need to transfer property while you’re healthy all mean that earlier planning is significantly more effective than last-minute action. There is no fixed time limit on deprivation of assets assessments by local authorities, but the longer the gap between the transfer and any need for care, the harder it is to challenge.

By working with specialist estate planning professionals, you can ensure that your plans are legally robust, tax-efficient, and designed to withstand the specific threats your family faces.

Safeguarding Your Legacy: Practical Steps

Whatever happens to IHT in the future, taking practical steps now is the surest way to protect your family. As Mike Pugh says: “Not losing the family money provides the greatest peace of mind above all else.” Here are the concrete steps every homeowner should consider.

Establishing Trusts and Wills

A will tells people what you want to happen with your assets. A trust makes sure it actually does happen — and provides protections that a will simply cannot. Here’s the difference:

• Lifetime trusts: A lifetime trust takes effect during your lifetime. When you transfer your home into a properly structured discretionary trust, it bypasses probate entirely on your death — trustees can act immediately, without waiting months for a Grant of Probate. Assets in a discretionary trust are also protected from care fee assessments (provided the trust was established for legitimate reasons, years before any need for care arose), beneficiaries’ divorce, and bankruptcy. No beneficiary has a fixed entitlement in a discretionary trust — which is precisely why the assets cannot be targeted. A Family Home Protection Trust, for example, can protect your home while preserving your RNRB entitlement for IHT purposes.
• Wills: A properly drafted will is essential — it ensures your wishes are recorded and your executors have clear authority to act. But a will alone offers no protection against care fees, no protection against sideways disinheritance if your surviving spouse remarries, and no protection against your beneficiaries’ creditors or divorcing spouses. A will also goes through probate, which means delays (typically 3-12 months, longer where property needs to be sold), asset freezing during the process, and your will becoming a public document once the Grant is issued.

The two work together. A comprehensive estate plan typically includes both a will and one or more lifetime trusts, depending on your circumstances.

Taking Advantage of Allowances

The UK tax system provides several allowances that can reduce your IHT exposure — but only if you use them deliberately and consistently:

• Nil Rate Band (£325,000): Every individual has this IHT-free allowance. If you’re married or in a civil partnership and the first spouse to die leaves everything to the survivor, the unused NRB can be transferred — giving the surviving spouse up to £650,000 in combined NRB.
• Residence Nil Rate Band (£175,000): Available when you leave your main home to direct descendants. Combined with a spouse’s transferable RNRB, this gives a couple up to £350,000 in additional allowance — but only with correct will drafting.
• Annual gift exemption (£3,000): Use it every year. If you didn’t use last year’s, you can carry forward one year’s allowance, giving you up to £6,000 in the current year.
• Normal expenditure out of income: If you have surplus income that you don’t need for your standard of living, regular gifts from that income are completely IHT-exempt. This is one of the most powerful but underused exemptions — it has no upper limit, provided the gifts are regular and from income (not capital). Keep careful records to evidence the pattern of giving.

Regular Estate Reviews

Estate planning is not a “set and forget” exercise. Your circumstances change, tax laws change, and property values change. We recommend reviewing your estate plan:

• After any significant life event — marriage, divorce, bereavement, birth of a child or grandchild, or remarriage of a surviving spouse.
• When tax laws change — such as the 2024 Budget changes to BPR/APR and pensions, which may require adjustments to existing plans.
• At regular intervals — ideally every 3-5 years — to ensure that your plans still reflect your wishes and take advantage of current allowances.
• If property values have changed significantly — a rising property value may push your estate above the NRB threshold, triggering a need for trust planning that didn’t exist when you first made your will.

By taking these practical steps, you protect your family’s wealth regardless of what politicians decide to do with IHT. The families who plan today are the ones whose legacies survive intact.

How Public Opinion Shapes Tax Policies

Understanding the relationship between public opinion and tax policy helps explain why IHT reform is so difficult — and why waiting for change is a risky strategy for your family.

Surveys and Polls on Inheritance Tax Reform

Polls consistently show that IHT is one of the most disliked taxes in the UK, despite affecting a relatively small percentage of estates. This is partly because people overestimate their likelihood of being affected and partly because the principle of taxing inherited wealth — money that has often already been taxed as income — feels fundamentally unfair to many.

However, when surveys ask whether people would prefer to abolish IHT or use the revenue to fund public services, opinions are far more divided. The public wants lower taxes and better services — an understandable but contradictory position that makes radical reform politically treacherous.

The Influence of Media and Campaigning

Media coverage plays a significant role in shaping the IHT debate. Stories about families losing the family home to pay an unexpected IHT bill generate strong emotional responses and fuel calls for reform. Campaign groups on both sides — those advocating abolition and those arguing IHT should be strengthened — use these stories to advance their positions.

The practical lesson for families is that media coverage and political promises don’t change the law. Only legislation does. Until the law changes, your estate is subject to the rules as they stand today — and those rules are clear: 40% on everything above the NRB.

Historical Shifts in Public Sentiment

Public sentiment on IHT has shifted over time, largely driven by property prices. In the early 2000s, when house prices were rising rapidly and more families were being caught by IHT, there was strong public support for raising the threshold — which eventually led to the Conservative promise to raise the NRB to £1 million (later replaced by the introduction of the RNRB in 2017). More recently, the focus has shifted from threshold reform to debates about whether certain reliefs (BPR, APR, pension exemptions) should be maintained.

Understanding these shifts is important context — but the practical message remains the same: government inheritance tax plans change slowly, and the direction of travel is towards more IHT, not less. Families who wait for reform risk waiting indefinitely.

The Future of Inheritance Tax in the UK

Looking ahead, the most credible assessment is that IHT will remain a feature of the UK tax system for the foreseeable future. The real question isn’t whether it will be abolished — it’s whether the rules will become more or less favourable for families over time. Based on current trends, the answer is less favourable.

Predictions from Tax Analysts

The consensus among tax analysts is clear: the government is moving to broaden IHT’s reach, not narrow it. Key predictions include:

• The NRB and RNRB will remain frozen at current levels until at least April 2031 — meaning that as property values continue to rise, more estates will exceed the threshold each year.
• The BPR/APR cap from April 2026 (100% relief limited to first £1 million, then 50%) will bring farming families and business owners into the IHT net for the first time.
• Inherited pensions becoming liable for IHT from April 2027 will significantly increase the taxable value of many estates — particularly those who have built up substantial SIPPs or workplace pensions.
• Increased HMRC scrutiny of trust arrangements and gifting patterns, driven by the need to maximise revenue from existing taxes.

The Role of Political Parties

The positions of the major political parties are instructive, though it’s worth remembering that all parties have historically promised IHT reform and delivered very little:

Impact of Economic Changes

Economic conditions significantly influence IHT policy. In times of fiscal pressure — which describes the current environment — governments are more likely to expand IHT than reduce it. The combination of high government borrowing, rising public spending demands, and the need for additional revenue makes IHT reform (in the direction of lower taxes) unlikely in the near term.

Conversely, rising property values mean that IHT receipts increase automatically even without any change to the rates or thresholds. This “fiscal drag” — where frozen thresholds combined with inflation pull more people into the tax — is a feature, not a bug, from the Treasury’s perspective. It generates more revenue without the political cost of explicitly raising tax rates.

What Should You Do Now?

The future of IHT is uncertain, but your ability to protect your family is not. The tools exist, the law permits them, and the only variable is whether you act. Here’s what we recommend.

Assessing Your Own Estate

Start with an honest assessment of where you stand. Most people underestimate the value of their estate because they don’t think of themselves as wealthy — but IHT is calculated on the total value of everything you own at death, including:

• Your home and any other property (at current market value, not what you paid for it)
• Savings, ISAs, and investments
• Pensions (from April 2027, these will be included in your estate for IHT purposes)
• Life insurance policies not held in trust
• Personal possessions of significant value — jewellery, vehicles, art
• Any gifts made within the last 7 years that count as potentially exempt transfers

If your total exceeds £325,000 (or £500,000 if you qualify for the RNRB), your family faces an IHT bill at 40% on the excess. For a married couple, the combined threshold can reach £1,000,000 — but only with correct planning.

Planning for Potential Changes

Given the direction of travel — more assets subject to IHT, not fewer — the smart strategy is to act now rather than wait. Consider these steps:

• Review your will to ensure it’s correctly structured to maximise NRB and RNRB transferability between spouses and to direct your home to direct descendants where the RNRB is available.
• Explore a lifetime trust for your home. A properly structured discretionary trust — such as a Family Home Protection Trust — can protect your home from care fees, sideways disinheritance, and probate delays, while potentially retaining your RNRB entitlement. Trust setup costs start from £850, which is the equivalent of less than one week’s care home fees (currently averaging £1,200-£1,500 per week).
• Begin a gifting strategy using annual exemptions (£3,000 per year), normal expenditure out of income, and potentially exempt transfers to start the 7-year clock running.
• Place life insurance into trust — this ensures the payout goes directly to your beneficiaries outside your estate, avoiding the 40% IHT charge. It’s typically free to set up.
• Review your pensions in light of the April 2027 changes — pensions that were previously outside IHT will be brought into scope, which may significantly change your planning needs.

Consult a Specialist

Given the complexity of IHT, the interactions between different reliefs and exemptions, and the consequences of getting it wrong, consulting a specialist estate planner is essential. A general-practice solicitor can write a will — but IHT planning, trust structuring, and care fee protection require specialist knowledge.

At MP Estate Planning, we publish all our prices transparently (Mike is the first and only company in the UK that actively publishes all prices on YouTube), and our consultations are designed to give you a clear picture of your estate’s exposure and the specific steps you can take to protect it. When you compare the cost of a trust to the potential costs of care fees (currently averaging £1,200-£1,500 per week) or a 40% IHT bill on your home, it’s one of the most cost-effective forms of protection available.

Contact Us for Expert Guidance

The debate about whether IHT will be abolished makes for interesting reading — but it shouldn’t form the basis of your estate plan. Governments have been discussing IHT reform for decades, and every time, the tax has remained. Meanwhile, more families are caught by it each year as the frozen thresholds fail to keep pace with rising property values.

Protect Your Estate from Unnecessary Taxes

Our team specialises in helping ordinary homeowners protect their families’ wealth using lifetime trusts, strategic gifting, and proper IHT planning. We don’t offer generic advice — every plan is tailored to your specific circumstances, family structure, and goals. Our Estate Pro AI system analyses 13 potential threats to your estate, ensuring nothing is overlooked.

Take the First Step Today

Fill out our contact form today to schedule a consultation with our experienced team. We’ll help you understand exactly where your estate stands, what threats it faces, and what practical steps you can take to protect your family — regardless of what politicians decide to do with IHT. As Mike Pugh says: “Plan, don’t panic.”