Families across the United Kingdom are preparing for a sharp increase in inheritance tax (IHT) liabilities, with recent projections suggesting that tens of thousands of estates will be affected in the coming years. According to a report from the law firm Irwin Mitchell, based on newly analyzed government data, the number of estates subject to IHT is expected to surge past 37,000 by 2027, resulting in a total tax bill that could reach nearly £9 billion. Such figures are particularly alarming given the ongoing freeze on the IHT threshold, which is now set to remain in place until 2030.
This increase is not uniform across the nation. Certain regions, especially Inner London, are anticipated to experience some of the highest concentrations of taxable estates, primarily driven by escalated property values and substantial wealth within these areas. Yet, cities such as Wolverhampton, Manchester, and Leeds are projected to witness significant increases in both the number of estates liable for the tax and the total amounts owed.
The report draws upon a Freedom of Information request submitted to HM Revenue and Customs (HMRC), covering approximately 177,000 estates across 121 UK postcodes. Notably, the findings highlight how changes introduced in last year’s budget, including the extension of the IHT threshold freeze and adjustments to business property relief (BPR) and agricultural property relief (APR), will further complicate the financial landscape for many families.
Andrea Jones, the national head of Irwin Mitchell’s private client advisory team, voiced considerable concern regarding the implications of these developments. She stated, “The increase in inheritance tax liabilities across the UK is a significant concern for many families.” Jones emphasized the necessity for individuals to seek professional advice to navigate these changes and strategize accordingly. The urgency to understand the financial ramifications cannot be understated, especially with the looming IHT threshold freeze and the alterations in relief measures projected to take effect from April 2026.
Specific data from the report illustrates the cities expecting the most dramatic rises in IHT liabilities. Bradford, for example, is forecasted to experience a staggering 150% increase in the number of estates subject to IHT, with estimates rising from 69 estates in the 2015/2016 period to 173 by 2027. This translates to a projected IHT burden of £30 million, reflecting a 233% hike from previous estimates.
Wolverhampton is expected to see the most remarkable increase in tax bills, with predictions suggesting a 375% rise, reaching an estimated £38 million across 143 estates—more than double the tally reported in 2015. Inner London, however, leads the projections in terms of the sheer number of estates likely to incur IHT liabilities, with an anticipated 4,813 estates expected to face taxes, marking an 80% increase from earlier figures. The cumulative IHT liability for Inner London families is projected to be approximately £1.6 billion by 2027, nearly double what families were liable for ten years ago.
Other metropolitan areas are also bracing for substantial increases in both the number and total value of IHT bills. Cities like Leeds, Manchester, and Birmingham are all experiencing double-digit surges in the share of estates subject to these taxes, marking a notable shift in the British tax landscape.
Interestingly, the average inheritance tax bill in Greater London is anticipated to reach £275,000 by 2027, with Inner London witnessing even higher figures, estimated at around £340,000. This stark divergence is largely attributed to the concentration of wealth in these areas, which artificially inflates property values. Meanwhile, Manchester is predicted to have the second highest average IHT liability outside of London, estimated at £282,051 per estate—approximately £40,000 more than the projected national average of £239,000.
Shifting focus to other key cities, Sheffield is expected to see significant upticks as well, although its average IHT bill may be somewhat lower than other major urban centers, reflecting its comparatively more modest property values. In a broader context, the reported increases are indicative of a growing need for proactive estate planning among individuals and families.
The report concludes that raising awareness about the projected growth in inheritance tax liabilities underscores the importance of strategic financial planning. Individuals are encouraged to explore various estate planning strategies, including gifting, the use of trusts, and reviewing pension and investment portfolios, in order to mitigate the financial consequences that these legislative changes may impose.
As many families confront the realities of potential inheritance tax liabilities, the emphasis on seeking professional financial advice grows ever more critical. Understanding how to navigate these changes may not only alleviate financial burdens but also ensure smoother transitions for wealth across generations. Individuals are urged to consider alternatives and proactive measures to shield their estates from the mounting effects of inheritance tax.