Inheritance Tax Fiscal Drag to 2030: The Data Behind a Frozen Threshold

Fiscal drag is what happens when a tax threshold is held fixed in cash terms while the values it applies to keep rising. For inheritance tax (IHT) in the UK, the nil-rate band has stood at £325,000 since April 2009, and the Office for Budget Responsibility records that IHT receipts have risen as a share of national income since 2009-10 mainly because asset prices have increased (OBR, updated 9 February 2026). This briefing collects the verified figures on how that mechanism widens the tax base to 2030, with every statistic dated, sourced and geographically scoped.

Unless stated otherwise, figures are for the United Kingdom, and monetary values are nominal (not adjusted for inflation). Two official measures appear throughout and should not be conflated: receipts are cash collected by HMRC in a financial year, while liabilities are the tax created on estates of people who died in a given tax year, reported later by HMRC. Figures are current as at July 2026 and are subject to change.

Executive summary

• 30,400 estates created an inheritance tax charge in the tax year 2023 to 2024, equal to 4.72% of the 644,000 UK deaths that year (HMRC, published 30 July 2026).
• UK inheritance tax liabilities reached £7.03 billion for deaths in 2023-24, a rise of £0.33 billion (5%) on 2022-23 (HMRC, 30 July 2026).
• The OBR forecasts UK IHT receipts rising from £8.7 billion in 2025-26 to £14.7 billion in 2030-31 (OBR, November 2025).
• The £325,000 nil-rate band has been unchanged since April 2009 and is now frozen up to and including the 2030-31 tax year, following the extension announced at the Autumn Budget 2025 (OBR, 9 February 2026).
• The average effective inheritance tax rate across taxpaying estates was 13% in 2023-24, well below the 40% headline rate, reflecting exemptions, reliefs and tax-free allowances (HMRC, 30 July 2026).
• London and the South East together accounted for 46% of all UK inheritance tax charged in 2023-24, from 11,120 taxpaying estates (HMRC, 30 July 2026).
• The Institute for Fiscal Studies projected the share of deaths resulting in inheritance tax rising from around 4% to roughly 7% by 2032-33 (IFS, September 2023).
• Estimate Had the nil-rate band risen with consumer prices since April 2009, it would sit at roughly £520,000 to £565,000 by 2026 on our modelling, against £325,000 as legislated (Fairchild Oldfield estimate; see synthesis).

Scale and trajectory

Inheritance tax is a small share of the UK tax take but a fast-growing one. The OBR puts 2025-26 receipts at about 0.3% of GDP and 0.7% of all receipts (OBR, 9 February 2026). The direction of travel matters more than the level: on official forecasts the annual take rises by two-thirds across the forecast period.

Sources: HMRC Inheritance Tax liabilities statistics commentary, 30 July 2026; OBR Economic and Fiscal Outlook, November 2025.

Liabilities and receipts are not directly comparable line to line, because liabilities are dated to the year of death while receipts are dated to when tax is paid, often months later. The consistent signal across both series is upward. The OBR attributes the rise to frozen thresholds, an ageing population, and asset prices that have outpaced the fixed bands (OBR, 9 February 2026).

The frozen threshold, and why it drags

The tax-free element of an estate is built from fixed cash allowances. When those allowances stay flat while estates grow, more estates cross the line, and estates already over it pay on a larger slice. The current allowances are set out below and, following the Autumn Budget 2025, are frozen up to and including 2030-31 (OBR, 9 February 2026).

Source: gov.uk, Inheritance Tax, as at July 2026, subject to change. Thresholds frozen to the end of 2030-31 (OBR, 9 February 2026).

The driver on the other side of the equation is asset values, and housing dominates most estates. The average house price in England was £292,000 in October 2025 (HM Land Registry UK HPI, October 2025), and the UK average was £271,295 in May 2026 (HM Land Registry UK HPI, May 2026). A single average-priced home now sits close to, or above, the standard £325,000 nil-rate band that has not moved since 2009.

Who pays, and at what real rate

Inheritance tax remains a minority event at death. In 2023-24, 95.28% of UK deaths created no inheritance tax charge, and the 4.72% that did paid an average effective rate of 13%, not 40% (HMRC, 30 July 2026). The gap between the headline and effective rate is the combined effect of the nil-rate bands, the spouse and civil partner exemption, charity relief, and business and agricultural reliefs.

Two reliefs are being reshaped. From 6 April 2026, agricultural property relief and business property relief give 100% relief on the first £2,500,000 of combined qualifying agricultural and business assets per person, and 50% relief above that; this allowance is transferable between spouses and civil partners, up to £5,000,000 per couple, including where the first death was before 6 April 2026 (gov.uk, 23 December 2025). Pension wealth is also being brought within the scope of inheritance tax from April 2027, a change the OBR reflects in the forecasts above (OBR, 9 February 2026).

Where the tax lands

Inheritance tax is concentrated in the higher-value housing markets of southern England. The table shows the two regions that dominate the total; together they raised 46% of all UK inheritance tax in 2023-24 from 11,120 estates (HMRC, 30 July 2026). The North East, Wales and Northern Ireland had the fewest taxpaying estates.

Source: HMRC Inheritance Tax liabilities statistics commentary, 30 July 2026. Regional figures are for taxpaying estates by region of residence.

Because the tax-free bands are the same nationwide but house prices are not, a frozen threshold bites hardest where property is dearest. That is a geographic feature of fiscal drag, not a policy targeted at any region.

The path to 2030

Three official strands point the same way to 2030. First, the OBR forecast has receipts rising to £14.7 billion by 2030-31 (OBR, November 2025). Second, HM Treasury and HMRC costings for the earlier freeze extension to 2029-30 (announced 30 October 2024 and since superseded by the further year to 2030-31) added 1,400 taxpaying estates in 2028-29 and 2,900 in 2029-30, lifting the share of deaths taxed by 0.2 and 0.4 percentage points in those years (gov.uk, 30 October 2024). Third, independent analysis by the IFS projected the taxed share of deaths reaching around 7% by 2032-33 (IFS, September 2023).

The IFS projection predates the Autumn Budget 2025 freeze extension and the pension and relief reforms, so it should be read as a directional projection rather than a current official forecast. The OBR figures are the most up to date and are the ones revised at each fiscal event.

1. The Fiscal-Drag Gap: what the nil-rate band would be if uprated Estimate

Logic. Take the £325,000 nil-rate band set in April 2009 and uprate it by cumulative UK consumer price inflation to 2026. The difference between that uprated figure and the legislated £325,000 is the fiscal-drag gap: the real erosion of the tax-free allowance.

Inputs. Nil-rate band £325,000 since April 2009 (OBR, 9 February 2026); cumulative UK CPI inflation of roughly 60% to 74% between 2009 and 2026 depending on the exact months and index used (ONS Consumer Price Inflation, 2026).

Result (model). Uprating gives an inflation-adjusted nil-rate band of roughly £520,000 to £565,000 by 2026, a fiscal-drag gap of about £195,000 to £240,000 per person on the standard band alone.

2. The Effective-Rate Reality Ratio: 40% headline versus 13% paid Estimate

Logic. Divide the average effective rate actually paid by taxpaying estates by the 40% headline rate, to size how far reliefs and allowances pull the real rate below the sticker rate.

Inputs. Average effective rate 13% and headline rate 40% for taxpaying estates in 2023-24 (HMRC, 30 July 2026).

Result (model). 13% divided by 40% is 0.33, so the average taxpaying estate pays roughly one-third of the headline rate. Put differently, exemptions, reliefs and tax-free bands remove about 67% of the notional 40% charge on the average taxpaying estate.

3. The Regional Concentration Index: southern England's share Estimate

Logic. Compare each region's share of UK inheritance tax with its share of UK deaths, to show where the tax is over-represented relative to mortality.

Inputs. London and South East share of UK inheritance tax 46% in 2023-24 (HMRC, 30 July 2026); UK total deaths 644,000 in 2023-24 (HMRC, 30 July 2026); regional shares of deaths from ONS mortality data (ONS Deaths, 2024).

Result (model). London and the South East hold well under half of UK deaths but 46% of the inheritance tax, so the tax is markedly over-represented in southern England relative to where people die. This is a direct fiscal-drag signature: identical national thresholds meeting sharply higher southern property values.

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Methodology

Source selection. Preference was given to primary official statistics and forecasts: HMRC for liabilities and effective rates, the OBR for receipts forecasts and the fiscal-drag narrative, gov.uk and HM Treasury for policy parameters, and HM Land Registry for house prices. The Institute for Fiscal Studies was used for an independent projection. Each figure was taken from, or traced to, its originating release.

Inclusion and exclusion. A statistic was included only where its figure, date and geography could be confirmed against a named source. Numbers that could not be verified to a primary or clearly-attributed source were excluded. Cash receipts and accrued liabilities are labelled separately and never merged.

Handling conflicts. Where sources differed, the most recent official figure was used and older figures were flagged as superseded. The threshold freeze end date is stated as 2030-31 on the current OBR position, superseding the earlier 2029-30 end date in the 30 October 2024 policy paper. The agricultural and business relief allowance is stated at £2,500,000 per person, superseding the earlier £1,000,000 announcement.

Estimates. Every derived figure in the synthesis is labelled as an estimate or model, with its formula, inputs and limitations stated. Estimates are never presented as official statistics.

Last updated. 2 August 2026. Figures are subject to change at future fiscal events.

Source quality ranking

No Tier 2 or Tier 3 sources are relied upon for any headline figure in this briefing. Secondary reporting was used only to locate primary releases, which were then cited directly.