Inheritance tax and rising estate values: what the new financial year means for your estate

As we enter a new financial year, many individuals and families will take the opportunity to review their finances. It is also an important moment to consider how rising estate values, particularly property, may affect exposure to inheritance tax, especially where tax thresholds have remained unchanged.

A changing landscape with unchanged thresholds

There have been relatively few changes to inheritance tax for the 2026 to 2027 tax year. However, one area to note is the proposed cap on Agricultural Property Relief and Business Property Relief at £2.5 million, which may impact certain estates.

More significantly for many families, the core inheritance tax thresholds remain unchanged.
The nil rate band has been fixed at £325,000 since 2009, and the residence nil rate band, currently up to £175,000, has remained at the same level since the 2020 to 2021 tax year.

Over that same period, property values have increased significantly. According to HM Land Registry data, average UK house prices have more than doubled since the early 2000s, with continued growth in many regions over the past decade.

As a result, more estates are now exceeding the available allowances and becoming subject to inheritance tax.

The impact on property heavy estates

This is particularly relevant for estates where a significant proportion of value is tied up in property.
In practice, we are increasingly seeing estates where the majority of value is held in a family home, with relatively limited liquid assets available. Where inheritance tax becomes payable, this can create immediate practical challenges.

Inheritance tax is generally due within six months of the end of the month in which the death occurs, after which interest may begin to accrue.

Where sufficient funds are not readily available, personal representatives may need to consider selling property to meet the liability.

Practical challenges in meeting inheritance tax liabilities

While selling property may appear to be a straightforward solution, the reality can be more complex.
The process of marketing a property, negotiating a sale, and progressing through conveyancing can take time. This is particularly relevant in a market which has seen periods of uncertainty in recent years, influenced by economic conditions and interest rates.

Even where a sale is agreed promptly, there is no guarantee that completion will take place within the timeframe required to avoid interest being charged on the outstanding tax.

This can place additional pressure on personal representatives at what is already a difficult time.

Why early planning matters

Against this backdrop, early estate planning is becoming increasingly important.

Reviewing a Will and considering the structure of an estate at an earlier stage may help identify opportunities to manage exposure to inheritance tax. This will depend on individual circumstances, but may include:

Considering how assets are held and whether any restructuring is appropriate
Reviewing eligibility for available reliefs and allowances
Exploring lifetime gifting strategies where suitable
Ensuring that a Will reflects current intentions and makes effective use of available thresholds
Taking advice at an early stage can help provide clarity and, in some cases, reduce the likelihood of more complex issues arising later.

A timely opportunity to review

The start of a new financial year can serve as a useful prompt to review existing arrangements.
For many, the combination of rising property values and unchanged tax thresholds means that inheritance tax is now a more relevant consideration than it may have been previously.

A proactive approach can help ensure that estates are structured as efficiently as possible and that practical challenges for personal representatives are minimised.