The latest Transact Inheritance Tax (IHT) Index has revealed that upcoming reforms will bring millions more UK households into the scope of inheritance tax from April 2027, fundamentally changing the estate planning landscape.
The Index, launched in 2022 and based on data from the Office for National Statistics’ Wealth and Assets Survey, shows that including pension wealth in estate valuations will reverse a decade of easing IHT exposure.
Until now, the proportion of households potentially liable for IHT had fallen from 9.4% in 2014–16 to 6% in 2020–22, largely due to the introduction of the residence nil rate band. From 2027, that progress will be undone in a single step.
The number of households projected to fall within IHT scope will rise from 1.6 million to 5.1 million, with the total value of estates potentially subject to tax increasing from £472bn to £1.9tn.
London and the South East are expected to be hardest hit, with more than a quarter of households in both regions exceeding the £1m threshold.
Despite the scale of the change, public awareness remains low. A survey of 1,500 people, conducted by Trajectory and included in the Index, found that fewer than 30% of homeowners are fully aware of the 2027 reforms, while a third have no knowledge of them at all.
Advisers responding to the Index report increasing demand for estate planning, with trust-based planning, gifting from surplus income and investment bonds identified as key tools to manage liabilities.
Almost half of advisers believe the reforms will also open up broader opportunities for intergenerational planning, albeit with greater complexity.
Andrew Cullen Jones, chief development officer at Transact, said: “The 2027 reforms represent a fundamental transformation in estate planning.
“With a dramatic increase in both the number of affected estates and the scale of potential liabilities, individuals, particularly those with significant pension assets, must reassess their financial strategies.
“Steps such as lifetime gifting, reviewing pension withdrawal strategies and the use of investment bonds in combination with careful trust planning can help mitigate the impact.
“Professional financial advice will be essential to navigate this evolving landscape and to ensure that families can maximise the inheritance passed on to future generations.”
