Inheritance tax, the Autumn Budget and rising inflation

Our experts guide you through the reasons why forward-thinking estate planning matters now, more than ever.

With the £325,000 nil-rate band frozen since 2009 and the residence nil-rate band unchanged at £175,000 since 2020, rising inflation and sustained increases in asset values – particularly residential property – are pushing a record number of families into the Inheritance Tax (IHT) net.

Even though UK inflation has eased from its 2022 peak, the cumulative effect of years of elevated inflation means asset prices remain significantly higher than when the thresholds were set. House prices in many parts of the South East and wider commuter belt have risen well beyond the combined £500,000 or £1 million thresholds available to couples, leaving previously ‘ordinary’ estates unexpectedly taxable.

Recent HMRC data shows that in the 2022-23 tax year the South East saw 6,650 estates paying IHT, with a combined tax liability of £1.45 billion. London and the South East together accounted for over half of all IHT liabilities in England, underlining the acute impact of rising property prices in these regions. At the same time, UK-wide IHT receipts have continued to climb, reaching £8.2 billion in 2024–25, the highest on record.

Even though HMRC has not yet released newer regional breakdowns, the national trend strongly suggests the South East remains one of the hardest-hit areas for IHT exposure. For context, the average IHT bill in the South East is now estimated at around £218,000, up from approximately £180,000 – £200,000 five years ago. Rising house prices, combined with long-term frozen thresholds, remain the driving force behind this increase.

These figures underline the growing reach of IHT and the shrinking headroom for families whose estates are now at risk of drifting into chargeable territory through inflation and market movement.

How the Autumn Budget affects IHT – the everyday impact

The latest Budget has kept IHT firmly in focus. While the Government has not reduced or removed the tax, the Budget confirmed the following direction of travel:

1) The IHT thresholds remain frozen indefinitely
These rates will remain as they are:

• £325,000 nil-rate band,
• £175,000 residence nil-rate band, and the
• £2 million taper threshold.

Everyday impact
Most families will not feel richer year-on-year as wages and savings are stretched by cost pressures, but their house value keeps climbing, quietly pushing them into the IHT danger zone. Therefore, more ordinary families will face 40% tax bills simply because the thresholds have been left behind by inflation.

2) Higher public spending funded partly through fiscal drag
Rather than increasing headline tax rates, the Government is relying on people drifting into tax bands they were never meant to reach.

Everyday impact
Families who would never consider themselves ‘wealthy’ will find, sometimes only after a death, that the estate is taxable. This could add:

• delays to probate as an application to HMRC must be made first,
• stress for grieving families, and
• pressure to sell assets such as the family home.

3) No reform of the residence nil-rate band (RNRB)
The complexities of the RNRB (downsizing rules, tapering, linear descendants) remain untouched.

Everyday impact
Individuals with blended families, unmarried partners, childless individuals and estates above £2 million, continue to miss out on relief that others take for granted.

4) Lifetime gifting rules left unchanged (for now)
Although the Budget did not announce reforms, the government signalled a review of reliefs generally. This includes the broader framework of non-domiciliary taxation, capital taxes, and anti-avoidance provisions.

Everyday impact
We should assume HMRC will take a closer interest in:

• historic lifetime gifts,
• valuations,
• potentially exempt transfers close to death, and
• the use of trusts.

Therefore, those who plan early will be in a far stronger position if reforms tighten the regime later.

Why you should seek legal advice now

IHT planning is no longer something that can be safely postponed. A decade ago, many estates naturally fell below the threshold. Today, that is no longer the case, especially with the new Budget confirming that frozen thresholds are here to stay.

A specialist solicitor can help you:

• Value your estate accurately and model likely tax exposure under current frozen thresholds
• Maximise available reliefs, including the residence nil-rate band and transferable allowances
• Put appropriate will structures in place, such as life interest trusts or discretionary trusts
• Consider lifetime gifting strategies, including annual exemptions, PETs and business relief planning
• Review liquidity, ensuring the estate can pay IHT without forcing the sale of the family home
• Address international assets, especially where forced heirship or EU succession rules may apply

In a time when inflation and fiscal drag are eroding the effectiveness of the thresholds year-on-year, early planning is the only reliable shield.

Why DIY planning is inadvisable

With the rise of online will-writing platforms and non-specialist advisers, it may be tempting to seek a low-cost solution. However, estate planning is inherently complex, and incorrect or incomplete arrangements can create significant risk.

Professional planning ensures your arrangements:

• Comply with the Inheritance Tax Act 1984 and current HMRC practice
• Reflect your genuine intentions, protecting vulnerable or minor beneficiaries
• Are supported by clear records, crucial when lifetime gifts or business assets are involved
• Are actively reviewed, ensuring the plan adapts as asset values and family circumstances change

The cheapest solution is rarely the safest.

Practical consequences of inaction

Failure to plan effectively can result in:

• Up to 40% of the estate being lost to IHT unnecessarily
• Unanticipated tax liabilities for beneficiaries
• Delays in probate and forced sale of property or investments
• Increased stress and cost for the executors and family during administration

Inflation has closed the gap between ‘comfortable’ and ‘taxable’, and the government’s long-term freeze on thresholds means this trend will continue year by year.

Final thoughts

With the nil-rate band frozen and asset values rising, the scope for proactive planning is narrowing. Clients are strongly advised to take early legal advice to mitigate future tax exposure and ensure their estate is passed on in accordance with their wishes.

At Furley Page, we provide comprehensive, tailored advice on all aspects of wills, trusts, and estate planning. Whether you wish to update an existing will, explore trust options, prepare lasting powers of attorney (LPA) or undertake full estate restructuring, our team is here to support you.

Contact the Private Client team to arrange a confidential consultation at pcenquiries@furleypage.co.uk or call 01277 763939.

Furley Page has offices in Canterbury, Chatham and Whitstable in Kent.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.