Will Inheritance Tax Threshold Increase? What Frozen Allowances Mean for UK Families

Belgravia Capital
May 31
3 min read

With inflation driving up property prices and more families breaching the inheritance tax (IHT) limit, it’s no surprise many are asking:

“Will the inheritance tax threshold increase?”

The simple answer is: not anytime soon. In fact, the main thresholds have been frozen for over a decade - and will remain frozen until at least 2028.

At Belgravia Capital Wealth Management, we understand how frustrating this is for families whose wealth has grown largely due to inflation, not excess.

In this article, we explain what the IHT thresholds are, why they’re frozen, whether they’re likely to rise, and how to plan around them effectively.

What Is the Inheritance Tax Threshold in the UK?

As of 2025, the main IHT thresholds are:

£325,000 Nil-Rate Band (NRB) - The standard allowance for all individuals before IHT applies.
£175,000 Residence Nil-Rate Band (RNRB) - An extra allowance if your main home is passed to a direct descendant.

These two combine to give individuals up to £500,000 tax-free, or £1 million for married couples and civil partners if both allowances are used.

How Long Have IHT Thresholds Been Frozen?

The £325,000 NRB has been frozen since 2009 - over 15 years with no increase.
The £175,000 RNRB was introduced in 2017 and has been frozen since April 2020.
In the March 2021 Budget, the Chancellor confirmed both bands would be frozen until at least April 2028.

With inflation and asset values rising, the real value of these thresholds has significantly declined.

What’s the Impact of the Frozen Inheritance Tax Thresholds?

More estates are becoming taxable.
Middle-income families are increasingly dragged into the IHT net.
The government is collecting record levels of IHT, hitting over £7.5 billion in 2023–24.
Families with relatively modest estates - especially in the South East - are now facing large tax bills.

This is often referred to as a “stealth tax”, where tax revenue rises without changing the rate or making headline-grabbing announcements.

Will the Inheritance Tax Threshold Increase in Future?

There are currently no confirmed plans to increase the thresholds.

Political context:

The current government has chosen to freeze thresholds to raise revenue without increasing taxes directly.
They have also brought pensions into the IHT equation and reduced IHt relief for landowners.
While some MPs have suggested raising or even scrapping IHT, these ideas have not progressed past speculation.

Economic context:

Raising thresholds would reduce government revenue at a time of budget deficits and rising spending.
Any increase would likely be targeted and limited - for example, tied to inflation rather than offering major new reliefs.

In short: don’t expect thresholds to rise any time soon.

What Do Frozen IHT rates Mean for Your Estate?

The freeze effectively means:

Your estate’s value keeps growing, but your tax-free allowance doesn’t.
Even families who never expected to pay IHT may now face a 40% tax bill on a portion of their assets.
Delaying planning could expose you to a much higher tax liability in future.

How to Plan Around Frozen IHT Thresholds

Rather than hoping for change, smart families are proactively reducing their exposure:

Lifetime Gifting

Gifts made more than 7 years before death are outside your estate
Use your annual exemption (£3,000 per year) and gifts from surplus income

Using Trusts

Place assets in trust to reduce the size of your estate
Helps control how wealth is passed on

Insurance in Trust

Take out a whole-of-life policy to cover IHT and place it in trust
Provides liquidity for your beneficiaries to pay HMRC

Equalising Estates Between Spouses

Helps both partners use their full nil-rate and residence nil-rate bands

Business and Agricultural Relief

Qualify for up to 100% IHT exemption on business assets, AIM shares, or farmland (until 2026/27).

Case Study: A Family Hit by the IHT Freeze

2010: A couple owns a home worth £600,000 and assets worth £200,000. Below the IHT threshold at the time.

2025: That same home is worth £1.2 million, with assets worth £400,000. Their combined estate is £1.6 million, and only £1 million is tax-free.

Without planning, their heirs face an IHT bill of £240,000.

How Belgravia Capital Wealth Management Can Help with IHT and Estate Planning

We help families plan for rising tax exposure by:

Analysing IHT liabilities under current and projected thresholds
Structuring tax-efficient gifting, trusts, and insurance
Coordinating with legal and tax advisors to maximise reliefs
Designing flexible, forward-looking estate strategies

Whether you’re nearing retirement or planning for the next generation, our advice is bespoke and built to protect your legacy.

Conclusion: Will the Inheritance Tax Threshold Increase?

No, not in the near future.

With allowances frozen until at least 2028 and inflation climbing, your effective exposure to inheritance tax is likely to increase - even if the rules don’t change.

Now is the time to plan, protect, and preserve your estate before the taxman takes more than you expect.