Top 10 areas with the biggest inheritance tax bills – is your town on the list?

A trio of wealthy London neighbourhoods face an average inheritance tax bill of more than £1 million per estate, new figures reveal.

Kensington tops the list of UK areas with the biggest inheritance tax (IHT) bills, with estates that pay the tax hit with an average bill of £1,375,000.

Chelsea and Fulham comes second (£1,114,583 average IHT bill), followed by the cities of London and Westminster (£1,075,949).

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The analysis of HMRC data by law firm Irwin Mitchell shows that the capital dominates the top 10 list – however, two areas outside of London do make an appearance.

Estates that pay IHT in Torridge and West Devon face an average bill of £534,247, placing it eighth in the list. Meanwhile, beneficiaries of estates in Altrincham and Sale West in Greater Manchester are hit with a £451,220 levy, putting it in the tenth spot.

Andrea Jones, national head of Irwin Mitchell’s private client advisory team, comments: “Our analysis underscores the importance of proactive estate planning, particularly in areas with high-value estates. As property values and asset portfolios continue to rise, so too does the complexity of managing inheritance tax exposure.”

The firm forecasts that the number of estates liable for IHT will rise from 4% to 7% by 2028, with Greater London’s annual IHT bill expected to grow by 54% from £1.7 billion to £2.6 billion.

Separate analysis by the insurer NFU Mutual reveals that London and the south-east both pay more inheritance tax than Scotland, Wales and Northern Ireland combined.

Estates in London and the south-east paid £2.98 billion of the £6.7 billion raised by inheritance tax in the UK in 2022-2023.

The average inheritance tax-paying estate in London was charged £300,000, according to NFU Mutual.

The figures come as the government prepares to tax pension pots as part of an inheritance tax crackdown from April 2027, while IHT reforms to agricultural property and business property reliefs will kick in next April.

Sean McCann, chartered financial planner at NFU Mutual, comments: “Inheritance tax is impacting a growing number of families, as the main £325,000 tax-free allowance and £175,000 allowance that allows you to pass a share of the family home to children or grandchildren remain frozen until 2030.

‘’The proposal to bring pensions into the inheritance tax net from April 2027 will only accelerate the number of families impacted.’’

Top 10 areas with highest average IHT bill per estate

Here are the top 10 locations for average IHT paid per estate in 2022-23:

Source: HMRC inheritance tax returns July 2025, analysed by Irwin Mitchell. Note that the figures are an average of estates in that area that paid IHT; they exclude estates that did not have an IHT liability

Region by region: inheritance tax liabilities compared

Source: NFU Mutual, using HMRC inheritance tax liabilities statistics. Estimated numbers of estates liable to IHT in the 2022-23 tax year.

The analysis by NFU Mutual shows that almost 12,000 families in London and the south-east paid IHT in 2022-23. This compares to just 334 in Northern Ireland and 555 in the north-east.

London paid almost three times more inheritance tax than Scotland, Wales and Northern Ireland combined in the same tax year.

Overall, annual inheritance tax receipts have increased from £3.3 billion in 2005-2006 to £8.2 billion in 2024-2025, according to HMRC.

Increase in people seeking IHT advice

Wealth managers and financial advisers are reporting a rise in the number of people seeking IHT advice.

McCann at NFU Mutual observes: ‘’We are seeing a sharp increase in calls from those seeking inheritance tax advice, particularly in light of proposed changes to agricultural property relief and business property relief from April next year, which will have a huge impact on farming and business communities.”

Rathbones, RBC Brewin Dolphin and St. James’s Place have also told MoneyWeek that they’ve seen an increase in pension savers worried about the upcoming IHT changes.

Some retirees are now withdrawing more money from their pension pots in an attempt to reduce the size of their estate and therefore any potential IHT bill.

Wealth managers warn that there could be significant unintended consequences though, such as running out of money during retirement and being hit with income tax on the withdrawals.

Irwin Mitchell is also concerned about the practical implications of the government’s inheritance tax reforms.

The firm warns that the changes could turn estate administration into a “legal and emotional minefield, especially when pension beneficiaries differ from estate beneficiaries. Executors may be forced to use estate assets – potentially including the family home – to pay tax bills, then seek reimbursement from pension recipients who are under no legal obligation to cooperate”.

We debunk six inheritance tax myths and look at nine ways to reduce an inheritance tax bill in separate guides.