Why where you live could mean you face a higher inheritance tax bill

Inheritance tax bills are on the rise and there are some parts of the UK where the liability is set to hit six figures.

Despite a £325,000 threshold and a £175,000 main residence allowance, frozen thresholds, high house price growth and rising asset values have pushed increasing numbers of estates into the inheritance tax trap.

Research by The Private Office reveals that homes in 136 local authorities are already exposed to inheritance tax in 2026, with estimated average liabilities ranging from just over £150 to more than £340,000 per estate.

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The wealth manager analysed average property prices by local authority and estimated inheritance tax liabilities even with the nil-rate band and main residence allowance.

The Private Office’s analysis found that Kensington and Chelsea ranks as the UK’s most expensive inheritance tax hotspot, with most liability in London and the South East of England.

More regions could be hit from 2027 as well when unused pension savings are included in inheritance tax calculations.

Here are the regions facing the highest inheritance tax bills.

The regional inheritance tax divide

The data suggests a regional imbalance in inheritance tax exposure across the UK in 2026, with liabilities heavily concentrated in London and the South East.

This is compounded by higher house prices in these regions meaning an estate could easily surpass the current frozen thresholds.

Kensington and Chelsea tops the list, where the average property value is £1.18 million.

The estimated IHT liability reaches £343,924 per estate and the total average estate values exceed £1.3 million, according to the research.

Other London boroughs, including Camden, Richmond upon Thames and Hammersmith and Fulham, also show projected tax bills well into six figures. Beyond the capital, affluent southern areas such as Elmbridge, St Albans and Windsor and Maidenhead remain within taxable territory, reflecting sustained house price growth across commuter-belt locations.

In contrast, northern England features very limited exposure at higher levels, with only a small number of areas approaching the tax threshold.

Trafford is the only northern authority appearing in the dataset, with an estimated average inheritance tax liability of around £20,814.

The impact of pension changes on inheritance tax

More estates could be caught as a result of pension changes coming next year.

From 6 April 2027, unused pension funds will be included within an individual’s estate for inheritance tax purposes.

By combining average property values across 372 local authorities with estimated pension wealth, the research indicates that 152 areas previously below the threshold could become liable, bringing the total number of exposed local authorities to 288.

New regions that could face inheritance tax bills for the first time after the pension changes include Stevenage in Hertfordshire as well as the City of Edinburgh in Scotland and Cardiff in Wales.

Pippa Vick, financial adviser at The Private Office, said: “Inheritance tax is increasingly becoming a property tax by default.

"Many families don’t consider themselves wealthy, yet long-term house price growth – particularly in London and the South East – means their estates can face substantial tax bills. Without proper planning, beneficiaries may be forced to sell assets simply to settle the liability. Early advice and structured estate planning can significantly reduce the eventual tax burden.

“Pensions have long sat outside inheritance tax calculations, so bringing them into scope has a major regional impact. In high-property-value areas, the effect is dramatic, but even in more affordable regions, families who previously expected no inheritance tax may now face a bill. Planning early will be crucial.”