Upcoming reforms will drag millions more UK households into the scope of inheritance tax from April 2027, according to the latest Transact Inheritance Tax Index.
The number of households potentially liable for IHT is set to jump from 1.6 million to 5.1 million by 2027.
At the same time, the total value of estates subject to potential liability is expected to rise fourfold, from £472 billion to £1.9 trillion. London and the South East will be hardest hit, with more than a quarter of households in both regions projected to exceed the £1 million threshold.
Despite the scale of the change, public understanding around the reforms remains limited. Fewer than 30% of homeowners are fully aware of the 2027 policy changes, while a third are completely unaware.
Meanwhile, advisers report rising client demand for estate planning strategies. Trust-based planning, gifting from surplus income and investment bonds are already emerging as leading tools to manage liabilities and almost half of advisers believe the changes will also create broader opportunities for intergenerational planning.
Andrew Cullen Jones, chief development officer at Transact, said: “The 2027 reforms represent a fundamental transformation in estate planning. With a dramatic increase in both the number of affected estates and the scale of potential liabilities, individuals, particularly those with significant pension assets, must reassess their financial strategies.
“Steps such as lifetime gifting, reviewing pension withdrawal strategies and the use of investment bonds in combination with careful trust planning can help mitigate the impact. Professional financial advice will be essential to navigate this evolving landscape and to ensure that families can maximise the inheritance passed onto future generations.”
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