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Why more people are affected by Inheritance Tax than they think

Inheritance tax (IHT) is often viewed as a concern only for the wealthy.

Yet as property values continue to rise, tax thresholds remain frozen and unspent pensions are brought into its scope in 2027, more families are finding themselves drawn into the IHT net, often without realising it.

Recent research highlights a widespread lack of understanding around inheritance, probate and tax, particularly among younger adults.

This lack of clarity can have legal consequences, especially for those named in Wills or appointed as executors.

A third of adults assume IHT won’t affect them

A study by The Estate Registry revealed that 42 per cent of UK adults believe they have nothing to inherit, while a third (33 per cent) think IHT is only relevant to the wealthy.

In contrast, 28 per cent said they were very worried about facing an IHT bill in the future.

While the tax currently applies to just over four per cent of estates, the value of taxable estates is growing.

The number of estates subject to IHT has increased in recent years, due in large part to rising property prices.

Younger people are unclear about what happens when they inherit

The same research found that 57 per cent of people under 35 do not understand what happens when they inherit assets.

Even among the general population, nearly 40 per cent are unsure about the process of inheritance and probate.

This confusion can lead to missed obligations or delays, especially when individuals are named as executors or beneficiaries and are unaware of the legal steps required.

Probate is not automatic, and estate administration comes with specific responsibilities, including settling any tax owed to HM Revenue & Customs (HMRC).

Probate stumbling blocks caused by Inheritance Tax

Many people assume IHT is calculated and deducted automatically.

In practice, it is the executor’s legal duty to value the estate, assess the tax owed, and ensure that payment is made before applying for probate.

If the estate includes a property or other illiquid assets, this can delay access to funds, creating a situation where tax must be paid before the estate can be released.

From a legal standpoint, executors who miscalculate or delay may be held personally responsible.

These duties exist whether the executor is a family member or a professional.

Our probate solicitors can provide legal advice at the early stages of estate administration to help avoid errors and ensure compliance with HMRC rules.

Why more estates are creeping above the threshold

While the IHT nil-rate band remains at £325,000, the average UK property now stands at over £280,000, and considerably more in many parts of the country.

It does not take large investments to tip an estate over the threshold, especially when life insurance payouts, pensions, or jointly owned property are included.

For example, HMRC data from 2021–22 shows that the average IHT bill was £215,000, with estates in the £1 million to £1.5 million range seeing tax liabilities of over £300,000.

However, many individuals in this bracket may not realise they are exposed to the tax until the estate is already in probate.

Legal clarity is essential, even for modest estates

Executors and beneficiaries alike benefit from understanding the probate process and their legal rights and responsibilities.

Without this, there is a risk of non-compliance, avoidable delays, or family disputes. Clarity in the wording of a will, accurate valuations, and proper documentation all reduce the likelihood of legal complications.

This is particularly important for individuals acting as executors who may not have anticipated the scale or complexity of the role.

If you are involved in an estate and are uncertain about probate or IHT, we are here to help.

Our solicitors advise on all aspects of estate administration, from initial guidance through to probate applications and IHT compliance.

Contact us today for more information and assistance.

Rachel Blackburn

Head of Wills, Probate and Older Client Services

I joined Mander Hadley’s Wills, Probate and Older Client Services Team in 2018.I specialise in the preparation of Wills, Probate and estate administration, trusts and trust administration and Lasting Powers of Attorney. I also have experience of care fee planning and appeals of Continuing Health Care decisions.

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