The silent tax rise: How frozen nil rate bands and surging property values have created a hidden inheritance tax burden

For a growing number of families, frozen allowances and rising property values mean inheritance tax (IHT) is becoming increasingly difficult to avoid.

The nil rate band has been frozen at £325,000 since April 2009, while the residence nil rate band has been fixed at £175,000 since April 2020. Over the same period, property and other asset values have risen sharply, quietly drawing more estates into the IHT net.

HMRC figures show that IHT receipts have reached record levels, exceeding £7.5bn in the 2024–25 tax year. This increase has been driven in part by frozen thresholds and rising property values.

Frozen thresholds in context

The nil rate band has stood at £325,000 since 6 April 2009. At that time, the average London house price was around £250,000. Had the allowance broadly kept pace with inflation, it would now sit somewhere between £475,000 to £500,000. Instead, it remains unchanged and is set to stay frozen until at least April 2030.

The residence nil rate band, introduced in April 2017 and reaching its maximum of £175,000 from April 2020, has also been frozen. This allowance is tapered away once the net value of the estate exceeds £2m, reducing by £1 for every £2 above that threshold.

For married couples and civil partners, the maximum combined allowances, assuming full transferability and eligibility for the residence nil rate band, total £1m. That figure has not changed for several years and isn’t expected to change for several more. In parts of the UK where even modest family homes exceed this value, the impact is stark.

Property growth and fiscal drag

London has long been one of the most buoyant property markets in the world, and the period during which IHT thresholds have been frozen has seen extraordinary growth. Similar trends have been seen elsewhere in the UK.

Between 2016 and 2019, house price growth moderated to around 2–4% a year, influenced by Brexit uncertainty and tighter mortgage affordability. The stamp duty holiday introduced in mid-2020 triggered a sharp acceleration, with annual growth exceeding 10% by mid-2021.

Subsequent interest rate rises dampened demand from late 2022, leading to price falls in some regions during 2023. By 2024 and 2025, modest recovery had begun as mortgage rates stabilised, although affordability pressures and high construction costs remained.

The cumulative effect has been a widening gap between estate values and available IHT reliefs. What was once a concern for the very wealthy now affects a far broader group of homeowners whose estates have increased in value through market forces rather than deliberate wealth accumulation.

Quantifying the hidden tax exposure

Consider a married couple who bought a family home in a London suburb in 2009.

This represents an increase of more than four-and-a-half times, driven almost entirely by asset appreciation against a frozen threshold.

The wider consequences

For many families, the home is the single largest asset in the estate. Where IHT liabilities are high and most of the estate’s value is tied up in property, executors and beneficiaries may be forced to sell the family home simply to fund the tax bill.

IHT is usually payable within six months of the end of the month of death, with interest accruing after that point. Although HMRC allows tax attributable to land and property to be paid by instalments over up to 10 years, interest is charged on the outstanding balance. For families facing six- or seven-figure tax bills, this can create significant financial and emotional pressure.

Tax planning in a frozen landscape

The prolonged freeze in IHT allowances, set against sustained asset growth, has created levels of exposure that would have been difficult to predict when the nil rate band was first fixed in 2009. The good news is that, with timely and careful planning, the impact can often be reduced or managed. As with much tax planning, the key is to act early.

For families whose estates are approaching or have exceeded the available allowances, reviewing their IHT position is no longer just sensible but increasingly urgent.