Copy article

Is inheritance tax now a middle-class problem?

Journalist: Scott Gallacher, Newspage Newsdesk

ended 22. April 2026

The nil-rate band has remained fixed at £325,000 since 2009 and, although the residence nil-rate band was introduced in 2017, that too is now frozen. Over the same period, house prices and investment values have risen significantly.

On paper, that means more estates are being pulled into the inheritance tax net.

What was once seen as a tax on the very wealthy is increasingly affecting those with a family home and modest savings — particularly in areas where property values have grown strongly.

“Frozen thresholds and rising asset values are quietly dragging more families into scope, often without them realising,” says Chartered Financial Planner Scott Gallacher of Rowley Turton.

“The reality is that IHT is becoming a middle-class issue by stealth. Many families are being caught not because they’ve actively built significant wealth, but simply because asset values have risen over time.”

“For some, it comes as a genuine surprise. They don’t feel wealthy, yet their estate may face a 40% tax charge on part of their assets.”

This raises some important questions for advisers and tax experts:

  • Are you seeing more ‘unexpected’ IHT cases — clients who wouldn’t have been exposed even five or ten years ago?
  • To what extent is the family home now the main driver of IHT liability?
  • Is IHT still widely misunderstood, particularly among middle-income families?
  • Are clients engaging with planning early enough, or only once it’s too late to act effectively?
  • Has fiscal drag fundamentally changed who this tax now affects in practice?

We’d be keen to hear whether inheritance tax is now firmly a middle-class issue — and how that is changing the advice clients need.

6 responses from the Newspage community

Copy all

Copy

Editor
Scott Gallacher
Director at Rowley Turton
Yes — inheritance tax has become a middle-class issue. When Rowley Turton was founded nearly 30 years ago, it mainly affected the wealthiest local families. Today, a combination of rising property values and frozen thresholds means far more ordinary families are paying IHT. As a result, IHT planning is now a core part of our day-to-day work — and the good news is that with sensible forward planning, many can significantly reduce their liability
Copy

Editor
Rob Mansfield
Independent Financial Advisor at Rootes Wealth Management
More and more families are feeling the squeeze. It's a combination of it being a poorly understood tax and the frozen rates dragging more people into the net. I've met with people terrified of inheritance tax who are never likely to pay it and others who are blissfully unaware of the 6 figure bill their families face on their death. It takes time to reduce the potential bill and so leaving it too late can drastically reduce your options.
Copy

Editor
Eamonn Prendergast
Chartered Financial Adviser at Palantir Financial Planning Ltd
Inheritance tax is no longer just a wealthy family problem. For many in the South East, it is becoming a middle-class problem by stealth. Frozen thresholds, rising property values, longer life expectancy and stronger asset growth have quietly pulled more ordinary families into scope, often without them realising it. The nil-rate band remains at £325,000 and the residence nil-rate band at £175,000, with both now fixed through 2030–31, while estates above £2 million begin to lose the residence allowance altogether. From 6 April 2027, unused pension funds and death benefits will also be brought into scope for IHT, which makes early planning far more important. For many families, this means gifting, trusts and life insurance are moving from being optional extras to core parts of good estate planning
Copy

Editor
Anita Wright
Chartered Financial Planner at Ribble Wealth Management
Inheritance tax has absolutely become a middle class problem, and most families don't realise it until it's too late. A couple who bought a modest family home in the North West, paid into workplace pensions, and kept some savings are now sitting on an estate worth well over the combined nil rate bands often without feeling remotely wealthy. They're not buying yachts. Yet their children could face a 40% tax charge on everything above the threshold. The family home is overwhelmingly the main driver. In my experience, eight out of ten cases where families are unexpectedly caught by IHT, the house is doing the heavy lifting. The residence nil rate band helps, but it comes with conditions and tapers that many people don't understand, and it doesn't come close to offsetting 17 years of house price growth. The most effective IHT planning gifting, trusts, insurance arrangements, pension structuring takes years to work properly.
Copy

Editor
Martin Rayner
Financial Adviser at Compton Financial Services
We are seeing far more “unexpected” IHT cases when retirement planning. Clients who would not have been exposed five or ten years ago are now being caught simply due to rising asset values.

The family home is now the main driver. In many cases, the property alone uses up most or all of the available allowances.

IHT is still widely misunderstood, particularly among middle-income families who do not see themselves as wealthy but are now within scope.

Engagement is improving, but many still leave it too late, which limits the planning options available.

Fiscal drag has fundamentally changed this tax. As Denis Healey said, it is “a voluntary levy paid by those who distrust their heirs more than the Inland Revenue.” In reality, most clients do trust their families, and that is why we are seeing more people planning earlier. With straightforward steps taken in good time, this is often a tax that can be significantly reduced or avoided altogether.
Copy

Editor
Eugen Neagu
Director at N2 Asset Management Limited
Inheritance Tax (IHT) can affect some middle‑class families, particularly where rising house prices push estates above the nil‑rate bands, even if the household’s income was never especially high. That said, IHT is still “voluntary tax” because, with timely and sensible planning—such as using allowances, exemptions, and lifetime gifting—many people can legally reduce or even eliminate an IHT bill altogether.

Middle-class families should be able to keep their main residence under the £1 million threshold, and when age 75 to purchase a pension annuity with their pension fund for two reasons: (1) death benefits become taxable, and (2) mortality drag becomes so high that it does not make sense to remain invested. Some sensible guarantee periods of 15 years could be added, and if those funds get paid after last death to children / grand-children, IHT may apply. Some clients could decide instead in their expression of wishes to gift those guaranteed payments to a charity on the last death.