Inheritance Tax 2026: Why More Families Are Now Affected and How to Plan Ahead

Inheritance Tax is no longer just a concern for the very wealthy.

More families are now being caught by Inheritance Tax. This is mainly because property prices and asset values have increased, while the tax-free thresholds have remained the same for many years.

If you do not plan early, a large part of your estate could go to HMRC instead of your family.

This guide explains what is happening and what you should do now.

Why more people are paying Inheritance Tax

The main reason is simple.

Your assets have increased in value, but the tax-free limits have not kept up.

For example:
• House prices have risen significantly
• Investment values have increased
• Business values have grown

However, the Inheritance Tax thresholds have remained largely frozen.

This means more estates are crossing the tax threshold each year.

Current Inheritance Tax thresholds

The standard rules are:

• £325,000 Nil Rate Band per person
• Additional £175,000 Residence Nil Rate Band if passing your home to children

This means a couple can potentially pass up to £1 million tax-free if structured correctly.

Anything above this is usually taxed at 40%.

Why this creates a problem

Many families now fall into this situation:

• Family home worth £600,000 to £1,000,000
• Savings and investments
• Pension or business interests

Even without being “wealthy”, the total estate can exceed £1 million.

This leads to a significant tax bill.

Example

Total estate value: £1.4 million

Available allowances: £1 million

Taxable amount: £400,000

Inheritance Tax at 40%: £160,000

This is a large amount that your family must pay, often within a short time.

Impact on families

Without planning, your family may:

• Need to sell property
• Use savings meant for future security
• Face stress during an already difficult time

In some cases, family businesses or assets must be sold to pay the tax.

Business owners and new risks

Recent changes have increased concern for business owners.

Reliefs such as Business Property Relief are now under more scrutiny and may be limited.

If your business value exceeds certain thresholds, part of it may be exposed to Inheritance Tax.

This means your family business could face a tax bill when passed to the next generation.

Why early planning is essential

Inheritance Tax planning is not something to leave until later.

The earlier you plan, the more options you have.

Good planning can:
• Reduce or eliminate tax
• Protect your assets
• Ensure smooth transfer to your family

Key strategies to consider

1. Use both spouse allowances

Married couples can combine allowances to maximise tax-free thresholds.

2. Make lifetime gifts

You can give assets during your lifetime.

If you survive 7 years, these may fall outside your estate.

3. Use annual gift exemptions

You can give away a set amount each year tax-free.

4. Consider trusts

Trusts can help control how assets are passed on and reduce tax exposure.

5. Review property ownership

Proper structuring can improve tax efficiency.

6. Plan for business succession

Ensure your business passes smoothly without creating a tax burden.

Common mistakes to avoid

Many people:

• Do no planning at all
• Assume their estate is below the threshold
• Ignore rising property values
• Do not update wills
• Miss available reliefs

These mistakes lead to unnecessary tax.

How we help at SV & Co

We help individuals and families:

• Review their estate position
• Calculate potential Inheritance Tax
• Plan tax-efficient structures
• Use available reliefs and allowances
• Create long-term strategies

We focus on practical planning that works for your situation.

Take action now

More families are now affected by Inheritance Tax than ever before.

This is not because they are wealthier, but because asset values have increased while thresholds have stayed the same.

If you own property, investments, or a business, you should review your position now.

A simple plan today can save your family a significant tax bill in the future.