Inheritance tax: sweeping changes ahead and why more estates will be caught

In the latest report from their Private Client Advisory team, which is based on previously unseen government data, they predict the number of estates liable for IHT will rise by 50% to over 37,000 by 2027, with the total IHT bill expected to approach £9 billion.

The report also identifies that nine out of ten UK postcodes will see more estates subject to IHT in 2026/27 compared to five years earlier.

The impact is particularly pronounced in Greater London, where the total IHT bill is projected to rise by 54% between 2022 and 2027, reaching £2.6 billion annually. The average IHT bill in the capital is expected to reach £275,000, and even higher in Inner London at £340,000. However, this trend is not confined to London; cities across the UK are also experiencing double-digit increases in the proportion of estates caught by IHT.

Drivers of the increase

Several factors are contributing to this surge. The most immediate is the ongoing freeze of the IHT nil-rate band, which has been extended until 2030. As property and asset values continue to rise, more estates are being drawn into the tax net. However, the most significant changes are policy-driven, with major reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR) set to take effect from April 2026.

Key policy changes from April 2026

From April 2026, the following changes will apply:

• Capped reliefs: The first £1 million of combined agricultural and business property will continue to receive 100% relief, but amounts above this threshold will only qualify for 50% relief. This marks a significant departure from the previously uncapped regime.
• AIM-listed shares: AIM-listed shares will only qualify for 50% BPR, regardless of value, and will not benefit from the new £1 million 100% relief allowance.
• Pensions (from April 2027): Unused pension pots will be included in the taxable estate, with the nil-rate band applied across both pensions and other assets, potentially reducing the overall tax-free allowance.

These reforms are expected to have a profound impact on family businesses, farms, and individuals with substantial pension pots, many of whom may face significant new tax liabilities unless they act promptly.

How Irwin Mitchell can help

In response to these sweeping changes, Irwin Mitchell is hosting a series of Inheritance Tax Roadshows across the UK in the coming months.

These topics will be covered:

• The new £1 million cap on Agricultural and Business Property Relief
• Reduced relief rates for AIM shares and trusts
• Strategic planning opportunities for business owners, landowners, and high-net-worth individuals
• IHT on most unused pension savings and death benefits from April 2027

The roadshows are designed for professional advisers, business owners, and anyone concerned about protecting family wealth.

• Find out more and register for the Irwin Mitchell Inheritance Tax Roadshow