The UK government is expected to introduce important updates to inheritance tax rules in the coming years, and many families are already asking what the HMRC inheritance tax changes 2027 could mean for them. Inheritance tax (IHT) is a major concern for homeowners, married couples, and anyone planning how to pass their estate to the next generation. Understanding these upcoming changes early can help people prepare, protect their assets, and avoid paying more tax than necessary.
In this article, we explain what inheritance tax is, what changes could happen by 2027, and how families can plan ahead.
What Is Inheritance Tax?
Inheritance tax is a tax paid on the estate of someone who has died. This includes money, property, investments, and valuable belongings.
Currently, inheritance tax is charged at 40% on estate values above the tax-free thresholds.
The main allowances today include:
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£325,000 – Nil-Rate Band (NRB)
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£175,000 – Residence Nil-Rate Band (RNRB) if you leave your home to children or grandchildren
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£500,000 total tax-free allowance for individuals
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£1 million for married couples or civil partners (when allowances are combined)
Although these rules apply now, the government and HMRC have been reviewing the system and are expected to make changes by 2027, which could affect millions of families.
What Could Change in 2027?
While the government has not confirmed final details, financial experts, tax planners, and policy analysts expect several possible updates. Here are the most likely HMRC inheritance tax changes 2027.
1. Thresholds May Be Frozen Until 2028
The tax-free allowance has been frozen for many years, and it may remain unchanged until 2028.
This means that as property values rise, more people will fall into the inheritance tax bracket.
2. Possible Removal or Adjustment of the RNRB
The Residence Nil-Rate Band may be reviewed. Some experts believe it could be reduced or replaced with a simpler system.
If this happens, families with homes valued above £500,000 could pay more IHT.
3. Changes to Gifting Rules
HMRC may tighten rules around:
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Large gifts
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Seven-year exemption
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Gifts from income
This could limit how much wealth families can pass on tax-free.
4. Digital Reporting and Faster Processing
By 2027, HMRC aims to make inheritance tax reporting fully digital.
This could reduce paperwork and speed up estate administration.
5. Possible Reduction in the IHT Rate
There have been discussions about lowering the tax rate from 40% to 20%, but this is still uncertain and depends on future government decisions.
Why Are These Changes Important?
Even small adjustments in the tax system can affect how much your loved ones receive.
For example:
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Rising house prices mean more estates exceed the threshold.
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Gifting rule changes could reduce tax-free options.
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Freezing allowances can indirectly increase tax bills.
Planning now means you can use today’s allowances before the 2027 changes arrive.
How to Prepare for the HMRC Inheritance Tax Changes 2027
Here are simple steps families can take:
1. Review Your Estate Value
Calculate the total value of your property, savings, investments, and assets.
2. Consider Early Gifting
If gifting rules change, acting before 2027 may help you save tax.
3. Make or Update Your Will
A clear will reduces stress and helps your family avoid legal issues.
4. Explore Trusts
Trusts can help protect family wealth and reduce future tax burdens.
5. Get Professional Advice
A tax adviser or estate planner can help you prepare for upcoming changes and protect your assets.
Final Thoughts
The HMRC inheritance tax changes 2027 are expected to make a significant impact on families across the UK. While not all details are confirmed yet, the direction is clear: planning ahead is more important than ever. By understanding the potential changes and preparing early, you can protect your estate, reduce tax bills, and ensure your loved ones receive the maximum benefit.
Staying informed will help you make confident financial decisions over the next few years.
