Thousands of families across the UK are being hit with inheritance tax (IHT) bills as property values soar while tax thresholds remain frozen. HM Revenue & Customs (HMRC) has reported a staggering £7 billion in IHT receipts between April 2024 and January 2025, up £700 million from the previous year.
With no major tax breaks in sight, experts warn that even more households will be affected. Many are now urgently looking for ways to minimize their tax liability before the government tightens the rules further.
The Inheritance Tax Trap Is Tightening
According to the Express, the IHT threshold has been stuck at £325,000 since 2009, with an extra £175,000 relief when passing on a main residence to direct descendants. While these numbers haven’t changed, property prices and investments have skyrocketed, forcing more estates into taxable territory.
Financial experts caution that things could soon get worse. Ian Dyall, head of estate planning at Evelyn Partners, believes the government may seek new tax revenue sources to address financial pressures, making IHT relief even harder to access.
What’s Changing, and How Could It Affect You?
Several key inheritance tax changes are already set to take effect in the coming years. In April 2026, business and agricultural property relief will be capped at £1 million, impacting entrepreneurs and landowners. By April 2027, pension pots will no longer be exempt, meaning retirement savings could face heavy taxation.
Additionally, the government is considering tighter rules on gifting, a strategy many families use to reduce IHT liability. If restrictions are imposed, options for passing down wealth tax-free will become even more limited.
Families Turning to Insurance to Cover Tax Bills
With fewer ways to avoid inheritance tax, more families are looking into whole-of-life insurance policies to cover future tax bills. These policies provide a guaranteed payout, helping beneficiaries manage the tax hit without selling off assets.
Ian Dyall reports a surge in interest, stating that many clients are now proactively securing insurance to protect their heirs from sudden financial burdens. With HMRC collecting record sums, families are seeking any available solutions to avoid losing wealth.
What Can You Do to Avoid a Shock Tax Bill?
To prevent unexpected inheritance tax liabilities, experts recommend taking early action. First, assess your estate’s value and determine your potential tax exposure. Next, maximize your tax-free gifting before new restrictions are introduced.
Consider whether insurance solutions could help cover future IHT costs. Most importantly, consult a financial advisor to explore estate planning strategies while there’s still time. As HMRC’s grip tightens, proactive steps today could mean massive savings in the future.
