More than four in ten homes purchased in England and Wales last year were valued above the inheritance tax threshold – up from just 13 percent in 2009 – as the frozen nil-rate band continues to pull more property investors into HMRC’s reach.
New analysis from three law firms shows that 281,734 of 681,054 properties sold in 2025 were priced at or above the £325,000 IHT threshold. In 2009, that figure stood at just 83,266 of 625,205 purchases.
Frozen since 2009, locked until 2031
The £325,000 nil-rate band has remained unchanged since 2009 and is set to stay frozen until at least 2031. Over the same period, average house prices have risen significantly, steadily expanding the number of estates exposed to inheritance tax.
The East Midlands saw the sharpest increase over the 16-year period. Some 24 percent of homes sold in 2025 were priced at £325,000 or more, compared with just five percent in 2009. Wales ranked second, rising from four percent to 20 percent, followed by the West Midlands at 28 percent versus seven percent.
This follows Landlord Knowledge’s reporting on increased HMRC inheritance tax investigations, which recovered £246 million in 2024/25 alone. The latest figures suggest the tax burden is widening well beyond those subject to investigation – affecting ordinary property owners whose homes have simply risen in value.
IHT receipts hit record £8.25bn
In the 2024/25 financial year, inheritance tax receipts reached a record £8.25 billion, up from £7.5 billion in 2023/24. The residential property values driving this increase show no signs of reversing.
Where a main residence is left to direct descendants, the residence nil-rate band can increase the tax-free allowance by up to £175,000 – potentially lifting the total threshold to £500,000. However, the number of homes purchased for £500,000 or more has also more than trebled over the same period, rising from five percent in 2009 to 18 percent in 2025.
Wales again recorded the largest growth at the higher threshold, with 645 percent more purchases above £500,000. The East Midlands followed at 604 percent growth, with the West Midlands at 581 percent.
For landlords with buy-to-let portfolios held personally, the frozen threshold creates significant estate planning challenges. Properties that were well below the tax threshold when purchased may now exceed it – particularly outside London where growth has been fastest.
What this means for landlords
- If you hold properties personally: Review your estate’s total value against current IHT thresholds – you may have crossed the £325,000 line without realising.
- For portfolio landlords: Consider whether limited company structures or trusts could reduce future IHT exposure – though professional advice is essential.
- Watch for: Any Budget changes to the 2031 freeze – the government has shown no appetite to raise thresholds despite rising receipts.
- Regional variation matters: East Midlands and Welsh landlords face the sharpest exposure growth – review holdings in these areas specifically.
- Bottom line: IHT planning is no longer just for wealthy estates – the frozen threshold means ordinary property values now trigger 40 percent tax bills.
Editor’s view
The frozen IHT threshold is a stealth tax in plain sight. While politicians avoid the political cost of raising rates, fiscal drag does the work for them. For landlords who built portfolios when £325,000 bought a three-bedroom house, the same properties now generate tax bills their estates may struggle to pay. Planning early is the only defence.
Author: Editorial Team – UK landlord & buy-to-let news, policy, and finance
Published: 5 March 2026
Sources: HMRC – Inheritance Tax
Related reading: HMRC recovers £246m in inheritance tax probes as investigations rise
