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Inheritance tax bills exceed £500,000 for almost 10% of estates
Thousands of estates have had to pay a six figure inheritance tax bill – and the issue looks set to worsen.
Nearly one in ten estates liable for inheritance tax were given a bill of £500,000 or more in the 2021 to 2022 tax year, the latest available data shows.
A total 27,850 estates paid inheritance tax in 2021/22, of which more than 2,520 (9%) faced a tax bill of at least £500,000. Of these 2,520, 890 estates were liable for more than £1 million in tax.
The data, which was obtained by a Freedom of Information request sent to HMRC by wealth and asset management firm Rathbones, shows the total number of estates liable to pay over £500,000 in inheritance tax has risen by 29% since the 2018/19 tax year.
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If this trend continues, Rathbones estimates that 3,524 estates will have to pay over £500,000 in inheritance by the end of the current 2025/26 tax year, based on an average increase of 8.74%.
The table below shows how much estates had to pay in inheritance tax from 2018 to 2022.
Swipe to scroll horizontally
Number of estates who had to pay inheritance tax (2018 to 2022)
Inheritance tax due
2018-19
2019-20
2020-21
2021-22
< £100,000
11,710
12,250
14,210
14,520
£100,000 – £249,999
5,670
5,830
6,890
7,270
£250,000 – £499,999
2,810
2,930
3,490
3,540
£500,000 – £999,999
1,280
1,290
1,520
1,630
£1 million+
680
730
870
890
Total
22,150
23,030
26,980
27,850
Source: HMRC
Rebecca Williams, divisional lead of financial planning at Rathbones, said she expects more and more people be “caught out by IHT charges, despite the availability of gifting allowances and the seven-year rule”.
She added: “The deep freeze on both the main nil-rate band and the residence nil-rate band, unchanged since 2009 and 2017 respectively, has led to a creeping form of fiscal drag.”
Williams said the steady rise in house prices and asset values means more estates are being taken above the inheritance tax threshold just because thresholds have not kept pace with inflation.
While the ballooning number of high inheritance tax bills is set to continue thanks to inflation and frozen tax brackets, the total number of people who face a tax bill of half a million pounds or more could dramatically increase in the coming years.
Rathbones expects that thousands more estates will face new or increased inheritance tax liabilities by 2030 because of this.
Williams said the heightened inheritance tax risk from pensions means it is “increasingly vital for families to engage in effective financial planning”.
“Without proactive steps, more estates will find themselves facing IHT bills they might not have anticipated,” she warned.
How to drive down your inheritance tax bill
The nil-rate band, the threshold below which your estate does not incur inheritance tax, in the UK is £325,000, meaning if your estate is worth less than this, you can pass it down tax-free.
Additionally, the residential nil-rate band adds an extra £175,000 to the nil rate band if you leave your house to your direct descendants, meaning you could leave a home worth up to £500,000 without incurring inheritance tax..
This can be further increased to £1 million if you and your spouse leave your estates to one another.
With an increasingly high risk that families will have to pay a high amount of inheritance tax on estates, it could be worth finding out what you can do to lower the tax burden or avoid inheritance tax altogether. This could include maximising your gift allowances.
For instance, you can give up to £3,000 of your assets away as a gift each year without it being liable for inheritance tax, and this can increase to £6,000 if you didn’t use the allowance the previous tax year.
You are also free to make more gifts than this, but if you die within seven years of making the gift, the inheritor will be liable for paying inheritance tax. The rate tapers off depending on when you gave the gift.
Join more than 165,000 subscribers and keep yourself informed with the latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Daniel is a financial journalist at MoneyWeek, writing about personal finance, economics, property, politics, and investing.
He covers savings, political news and enjoys translating economic data into simple English, and explaining what it means for your wallet.
Daniel joined MoneyWeek in January 2025 and previously worked at The Economist in their Audience team. He read history at Emmanuel College, Cambridge and edited Cambridge's student newspaper, Varsity.
In his free time, he likes reading, walking around Hampstead Heath, and cooking overambitious meals.
