Inheritance tax used to be something most families never gave a second thought. That is changing. HMRC collected £2.3 billion in inheritance tax between April and June 2026, which is £96 million more than the same period last year, and June was the highest single month on record. Behind those numbers are thousands of ordinary families: people with a house, some savings and a pension, not sprawling country estates.

So why is this happening, and what does it mean for you? Here is the picture in plain English.

What inheritance tax is, in plain English

Inheritance tax is charged when someone dies and the value of everything they leave behind, known as their estate, is higher than their tax-free allowances. The standard rate is 40%, and it only applies to the part of the estate above the allowances rather than the whole estate. If your allowances cover your estate in full, there is nothing to pay.

Why more families are being pulled into inheritance tax

The main allowance, called the nil-rate band, lets you pass on £325,000 free of inheritance tax. It has been stuck at that figure since 2009. If you leave your home to your children or grandchildren, you may qualify for an extra £175,000 on top, known as the residence nil-rate band. The government has confirmed both allowances will stay frozen until April 2031.

While the allowances stand still, house prices, savings and investments have kept rising. Each year the gap narrows, and estates that would once have been comfortably under the line now tip over it. HMRC's own commentary points to frozen thresholds and rising asset values as key reasons receipts keep climbing.

How much can a couple pass on tax free?

There is better news for married couples and civil partners. In almost all cases, anything you leave to your spouse or civil partner is free of inheritance tax, and when the second of you dies, their estate can use both sets of allowances. In the right circumstances a couple can pass on up to £1 million to their children or grandchildren before any tax is due: two nil-rate bands of £325,000 and two residence nil-rate bands of £175,000.

Two things to watch. The residence nil-rate band only applies where a home passes to direct descendants, and it starts to reduce once an estate is worth more than £2 million. And unmarried couples do not get these spousal exemptions automatically, however long they have been together, which makes a properly drafted will all the more important.

Gifts and the seven-year rule

Giving money away during your lifetime can reduce the tax your family may pay later, provided it is done with care. The main rules are:

• You can give away £3,000 each tax year without it ever counting towards your estate.
• Larger gifts usually fall outside your estate if you live for seven years after making them. Gifts into some trusts follow different rules.
• If you die within seven years, gifts made in the three years before death are counted at the full 40% rate. For gifts made three to seven years before death, a sliding scale called taper relief can reduce the tax due on amounts above the threshold.
• Leaving 10% or more of the net value of your estate to charity can cut the rate on the rest from 40% to 36%.

Gifting is one of those areas where a small mistake can undo a good intention, so it pays to understand the rules before you start handing money over.

What you can do now

Start by working out roughly what your estate is worth: your home, savings, investments, life policies not written in trust, and anything else of value. Our free inheritance tax calculator will give you a quick picture in a couple of minutes.

Bear in mind that from 6 April 2027 most unused pension funds are due to be counted as part of your estate too. We covered that change in detail in our guide to inheritance tax on pensions.

Then look at your will. A well-drafted will makes sure your allowances are used properly, your home goes where the residence nil-rate band needs it to go, and your wishes are carried out without leaving your family a puzzle to solve at the worst possible time.

If you'd like to talk through what this means for you and your family, you can book a free consultation with us. No pressure, just a friendly chat. And if you'd rather start with a quick sense of where you stand, our free inheritance tax calculator is a good first step.

This article is general information for England and Wales, not legal or financial advice, and the rules can change. Please seek personal advice about your own circumstances.