The Tax Threshold Frozen Longer Than Any Other
£325,000. That's been the inheritance tax nil-rate band since 2009 — refrozen twice more since, most recently until April 2031. 22 years without moving by the time it finally does, if it does. The longest freeze of any major UK tax threshold, and one that's just been extended to cover pensions and farms for the first time.
The basics
Inheritance tax is charged at 40% on the value of an estate above the "nil-rate band" — currently £325,000 per person. A separate "residence nil-rate band" of £175,000 applies when a home passes to direct descendants, meaning a single person can typically pass on up to £500,000 tax-free, or up to £1 million for a married couple using both partners' allowances. In 2022/23, IHT was paid on 31,500 estates — around 4.6% of all deaths that year — meaning the large majority of estates still fall entirely under the threshold, but that share has been climbing steadily as the freeze continues.
The full history
Nil-rate band, £ thousands, 1986–2026 (House of Commons Library)
The refreeze that keeps refreezing
This isn't simply one long-standing freeze — it's a freeze that has itself been actively extended twice by the current government. The threshold was originally due to unfreeze in 2028; the Autumn Budget 2024 pushed that to 2030; the 2025 Budget pushed it again to 2031. Each extension is a fresh decision, not an accident of inertia. Depending on which inflation measure you use to ask "what would it be worth today," estimates vary: adjusted purely for CPI inflation since 2009, the threshold would sit around £450,000; tracking the threshold's own historic average growth rate since 1986, it would be closer to £508,000. Both figures are legitimate ways of answering the question — they simply measure different things, which is itself a useful reminder that "what should this threshold be" doesn't have one single objectively correct answer.
Who's getting caught who wasn't meant to be
Inheritance tax was historically framed, and is still widely perceived, as a tax that only affects the very wealthy. The frozen threshold means that framing is becoming less true every year: as ordinary family homes — particularly in London and the South East, where prices have risen the most since 2009 — cross the £325,000/£500,000 combined threshold purely through general house price growth, a rising number of estates that would never have been considered "wealthy" in any conventional sense are being pulled into paying inheritance tax for the first time. This is exactly the same mechanical process described on our Fiscal Drag page, just applied to a different tax with a much longer freeze.
The pensions & farms controversy
The threshold freeze isn't the only recent change widening who pays. From April 2027, most unused pension savings and death benefits — previously outside the scope of IHT entirely for both defined contribution and defined benefit schemes — will be brought into the taxable estate, a significant change to how pensions have historically been treated as a way to pass on wealth outside the inheritance tax system.
A related, more publicly explosive change involved agricultural and business property relief. The Autumn Budget 2024 originally proposed capping 100% relief for qualifying farms at £1 million of combined assets, with 50% relief above that — triggering sustained protests from farmers and a sustained campaign led by the National Farmers Union, who argued the change would force family farms to be sold off to pay tax bills, since farm assets (land, machinery) are often high in paper value but low in accessible cash. Following that backlash, the government raised the threshold to £2.5 million ahead of the 2025 Budget — transferable between spouses like the standard nil-rate band, meaning a farming couple can now shelter up to £5 million in combined qualifying assets before the (still reduced, 50% relief) rate applies above that.
Reactions
“A fair approach that asks those with the broadest shoulders to contribute more, while protecting the vast majority of estates from ever paying inheritance tax at all.”
“This isn't a tax on the wealthy — it's a tax on the assets family farms need simply to keep operating, and it risks forcing farms to be broken up or sold to pay a bill they can't otherwise afford.”
“An unchanged threshold sounds neutral, but as property values and the general cost of assets rise over time, more estates cross it without any change to the rate or rules ever being announced — in practice, it is a tax increase.”
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