“As things stand inheritance tax may only affect a small percentage of estates, but that number is on the increase as an ever greater number of estates become liable for the most hated of taxes,” Nicholas Hyett, investment manager at Wealth Club, said. “This is a result of years of freezes in thresholds, matched with increasing house prices and rising inflation. Families who wouldn’t consider themselves to be wealthy at all may now face a bill on the passing of a loved one.”

The current IHT allowance has been frozen at £325,000 for 16 years, and will remain frozen for another five years until 2030. The £175,000 residence nil rate band hasn’t changed since 2020. “These freezes are a form of stealth tax, which allows the government to increase their take without a backlash from a headline grabbing tax hike, but still contribute to the highest tax burden in 70 years,” Hyett continued.

Inheritance tax remains a pain point for the UK's high net worth population. Last October, Reeves widened its scope to cover agricultural and business property - angering the UK's family farmers, for example. By extending IHT to worldwide assets of resident non-domiciled persons, that move was seen as the decisive blow to those non-doms thinking of leaving the UK. Tens of thousands of such non-doms have left the country, arguably shrinking the UK's long-term tax base. There have been rumours that Reeves might change tack on such issues, but she also faces near-term fiscal pressures.

“The Chancellor has already hinted at a U-turn on IHT for non-doms, thanks to the exodus of wealthy individuals over the last few months. But farmers who are lobbying hard for their own cause, have yet to see any relief, and rumours swirl that the Alternative Investment Market (AIM) could be a victim of double dipping as the Chancellor comes back to the UK's growth stock market looking for tax revenues,” he said.

“In this environment lifetime gifts are probably more attractive than ever, particularly regular gifts out of leftover income since these are immediately free of inheritance tax,” he added. “This approach is particularly popular with grandparents, who use it to pay for things like school or university fees. Avoiding double taxation from inheritance tax is a nice added sweetener.”

Frozen
“The impact of the frozen thresholds is impossible to ignore. It isn’t just a financial burden, but an emotional one, with growing fears that pensions and assets could be swallowed up by the tax,” Jonathan Halberda, specialist financial advisor at Wesleyan Financial Services, added.

“With pensions set to be brought into scope from 2027, people urgently need clarity – not a system that’s becoming ever more complex. Without it, families could make panicked decisions including premature pension withdrawals and rushed property transfers, without understanding the long-term consequences,” Halberda said.

Until there is clearer direction on what comes next for IHT, there are steps individuals can consider to manage their IHT exposure:

1. Give it away – smartly
Gifting money or assets is one of the simplest ways to cut an IHT bill.

People can give up to £3,000 a year tax-free to anyone, or unlimited gifts to your spouse or civil partner. Additionally, one can make regular gifts from your income – helping reduce the size of an estate over time. But it’s important to remember that gifts made within seven years of death may still be taxed.

2. Try a trust
Trusts can move assets out of an estate, so they’re no longer counted when IHT is calculated. People can still decide who benefits, how, and when, making it a powerful but complex tool, so it important to get advice before acting.

3. Protect a partner
Married couples and civil partners can pass everything to each other tax-free – including property. But long-term partners who aren’t married or civil-partnered get no automatic IHT break. For some, making it official can be a savvy financial move.

4. Make a will and keep it sharp
A will gives control. Without one, an estate follows set rules and may face a bigger tax bill. An up-to-date will helps people make the most of exemptions to ensure that money goes where it should.

5. Investing in unlisted companies that qualify for Business Property Relief
These are typically inheritance tax-free after two years. Investing in unquoted businesses can be risky. However, unlike giving the money away, you retain control. From 2026 you will have an overall £1 million Business Relief Allowance. Anything in addition will be taxed at half the normal rate or 20 per cent.

6. Investing in an AIM independent savings account (ISA). ISAs are not inheritance tax-free. When you pass away, your loved ones could miss out on 40 per cent of your hard-earned cash. AIM ISAs are a popular, although much riskier way, to reduce this. Currently AIM shares could be IHT free after two years. From 2026 the IHT will be halved to a rate of 20 per cent.