The growing IHT liability for home owners is increasingly being seen as a property tax, according to The Private Office.
Its new research shows that IHT liabilities are now hitting six figures across large parts of the UK in 2026, as rising property values continue to push more estates above the tax threshold, particularly across London and the south-east.
The analysis shows that 136 local authority area are already exposed to inheritance tax in 2026, with estimated average liabilities ranging from just over £150 to more than £340,000 per estate.
“A property tax by default”
Pippa Vick, financial adviser at The Private Office (TPO), said: “Inheritance tax is increasingly becoming a property tax by default. Many families don’t consider themselves wealthy, yet long-term house price growth – particularly in London and the South East – means their estates can face substantial tax bills.
“Without proper planning, beneficiaries may be forced to sell assets simply to settle the liability.”
Kensington and Chelsea tops the rankings, with a potential £343,924 average IHT bill on the average estate value of more than £1.3 million. Other hotspots include Camden, Richmond upon Thames and Hammersmith and Fulham, which are also into six figures.
That compares to Trafford, the only northern authority appearing in the dataset, which has an estimated average inheritance tax liability of around £20,814.
Upcoming pension changes from 6 April 2027 will also push up IHT liabilities. From that point, most unused pension funds and death benefits will also be included within an individual’s estate for inheritance tax purposes. This could bring 152 areas previously below the threshold into scope, increasing the total number of exposed local authorities to 288.
Early planning required
Vick continued: “Pensions have long sat outside inheritance tax calculations, so bringing them into scope has a major regional impact. In high-property-value areas, the effect is dramatic, but even in more affordable regions, families who previously expected no inheritance tax may now face a bill. Planning early will be crucial.”
The inheritance tax nil-rate band remains fixed at £325,000 until 2030/31, while the residence nil-rate band can increase the threshold to £500,000 when passing a home to direct descendants.
However, continued house price growth means more estates are exceeding these thresholds. Across the UK, inheritance tax receipts have already reached £8.25 billion in 2024/25 and are projected to exceed £9 billion by 2026/27.
To help property investors understand how they might be impacted by continuing house price growth, The Private Office has developed an inheritance tax calculator that estimates how bills could change by 2027.
