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Thousands more grieving families are set to be dragged into Britain’s most hated tax – with small cathedral cities and overlooked northern towns emerging as hotspots.
A damning new report lays bare the full impact of frozen thresholds and surging property prices, revealing that the number of estates hit by Inheritance Tax (IHT) will rocket by 50% by the end of the decade.
According to critics these, combined with death tax reforms, are a stealth raid on “middle Britain” – punishing families who’ve worked hard, saved responsibly and now face six-figure tax bills simply for passing wealth on to their children.
Legal experts at Irwin Mitchell, who analysed HMRC figures from 177,000 estates across all 121 UK postcode areas, say that once-affordable cities like Hull and Carlisle are now on track to become IHT flashpoints.
Meanwhile, wealthy but small cathedral cities such as Truro and Salisbury, with fewer than 70,000 residents combined, are predicted to see the sharpest rises in taxable estates.
Andrea Jones, head of Irwin Mitchell’s Private Client Advisory, warned: “These are places that have traditionally been seen as more affordable, but rising property values, regional investment, and demographic shifts are changing that.
“It shows that IHT is no longer just a concern for wealthy families – it’s becoming a reality for middle-income households across the UK. The geography of wealth is evolving, and inheritance tax is following it.”
The findings come as the Treasury prepares to rake in £9 billion a year from IHT by 2027 – up from £5.5 billion in 2021/22.
Biggest Inheritance Tax Risers – 2021/22 to 2026/27
Town Estimated increase Average IHT bill 2026/27
Truro 195% £129,200
Salisbury 92% £175,300
Carlisle 72% £173,900
Hemel Hempstead 70% £240,000
Slough 65% £321,200
York 65% £173,900
Southampton 65% £216,400
Cambridge 64% £191,100
Hull 63% £137,900
Oxford 57% £196,200
Ms Jones said: “Smaller cities are now emerging as new hotspots.
“These areas, traditionally seen as more affordable, are experiencing rising property values and increased investment, making them significant areas of IHT exposure.”
Even as London remains the epicentre of inheritance tax collections, with £2.6 billion expected annually by 2026/27, the rapid rise elsewhere is triggering alarm.
Key findings include:
* The number of estates paying IHT will surge from 24,000 to more than 37,000 within five years.
* Nine in ten postcode areas will see increases in taxable estates.
* In Greater London, the number of estates paying IHT is expected to hit 9,400, with average bills of £275,000, and as high as £340,000 in Inner London.
* Leeds, Manchester, and Birmingham are all forecast to see double-digit rises in taxable estates.
Ms Jones said: “The increase in Inheritance Tax liabilities across the UK is a significant concern for many families.”
Why are more households being dragged into IHT?
* Frozen tax thresholds – The nil-rate band (the amount you can pass on tax-free) has been frozen at £325,000 since 2009.
The residence nil-rate band (an extra allowance if you leave your home to direct descendants) is capped at £175,000.
Despite property prices rising significantly over the last decade, the thresholds haven’t been adjusted, so more estates now exceed them.
The freeze was extended until 2030 by the current government, dragging in even modest estates.
* Rising property prices – In many areas, house prices alone are enough to push an estate over the threshold.
Even families who don’t consider themselves wealthy are now falling into the IHT net, especially in the South East and London.
* Investment growth – Inherited ISAs, pensions, and investment portfolios have grown in value.
With the stock market and AIM-listed shares increasing over time, many estates now include significant financial assets.
* Relief reforms coming – From April 2026, Business Property Relief and Agricultural Property Relief will be capped at £1 million for full 100% exemption.
Anything above that threshold will only get 50% relief, hitting farmers, business owners, and landowners.
* Inherited pensions to be taxed – From April 2027, inherited pensions will fall under IHT – a major change, as pensions have traditionally been passed on tax-free.
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