More families in South Manchester and Cheshire to face Inheritance Tax from 2027

For many people, planning for the future of their estate is about making sure as much as possible passes to the people they care about.

However, changes expected to take effect from April 2027 could mean more families need to consider the potential impact of Inheritance Tax (IHT) as part of that planning.

New research from independent think tank, Tax Policy Associates, suggests that around one in five pensioner households across the UK – just over 20% nationally – could find their estates exposed to IHT under the incoming rules.

What’s more, in parts of South Manchester and Cheshire, the proportion of individuals impacted is estimated to be considerably higher.

What are the incoming IHT rules?

Inheritance Tax is a tax that is charged on what an individual owns upon death if, in the absence of an available relief, the value of what they own exceeds the IHT allowances applicable to their circumstances at that time. IHT allowances can range from £325,000 to £500,000 for an individual or twice that for a couple.

From April 2027, unused pension funds and pension death benefits will be included within the value of a person’s estate for IHT purposes. In many cases, this will dramatically increase the amount of value to be caught by IHT’s typical 40% liability.

IHT across the UK: what does the research say?

According to the latest study by Tax Policy Associates, an estimated 20.3% of pensioner households nationally could now be exposed to IHT once the changes take effect.

Perhaps unsurprisingly, however, there’s significant variation in the number of estates impacted across individual constituencies, ranging from around 9% in Durham to an outright majority (52%) in Wimbledon.

Property wealth is of course a part of the equation, but it isn’t the only factor: the report suggests that only around 40% of households exceeding the relevant IHT threshold do so because of increases in the value of their home alone.

In other words, under the incoming rules, a clear majority would still exceed the threshold if their property were valued at the price originally paid for it.

For families considering their estate planning strategy in light of the new IHT regime, the findings highlight the importance of looking at their financial situation as a whole, rather than focusing solely on the current value of the family home.

What could this mean for South Manchester and Cheshire residents?

The research indicates that several constituencies in our local area could have a noticeably higher proportion of pensioner households exposed to IHT than the estimated national ‘one in five’ figure.

These include:

• Altrincham and Sale West – 30.6%
• Tatton – 30.9%
• Manchester Withington – 25.4%

These estimates suggest all three constituencies could be disproportionately liable to pay IHT on their estates than the UK average – with Altrincham and Sale West and Tatton particularly prominent.

Does this mean I’ll have to pay Inheritance Tax?

It’s important to note that these figures don’t mean that three in ten pensioner households in these areas will automatically have to pay IHT.

Instead, the research provides an estimate of the proportion whose estates could cross the relevant IHT threshold in 2027, after taking account of nil-rate bands and eligible exemptions – which is quite different from the number that will ultimately face a tax bill.

In fact, TPA anticipates that around 60% of the estates identified as crossing the threshold will eventually be taxed.

This is because the value of an estate can change over the remaining years of an individual’s life – for example, gifts to loved ones, the impact of care fees and general spending during retirement and of course, the extent of any successful estate planning. IHT allowances and exemptions exist to reduce a person’s IHT burden. Some of these are automatic, but some require specific strategy and structures to be in place.

For this reason, if you’re concerned that your estate may fall within the scope of IHT, understanding your current position can be a useful starting point. It can also help you consider who you want to benefit from your estate, and how you would like your wishes to be carried out, after you pass away.

How we can help

There’s no ‘one size fits all’ approach to estate planning that will be right for everyone, and your options will ultimately depend on factors such as the assets you own, your family circumstances and what you hope to achieve from your strategy.

A qualified and experienced Wealth Protection solicitor will be able to review your circumstances, explain the IHT rules that may apply in your situation and help you consider appropriate steps as part of a wider estate plan.

It’s often the case that planning at an earlier stage may give you more opportunity to make informed choices about your estate – rather than relying on dealing with challenges retroactively once circumstances have changed and when there is less time to achieve the desired result.

If you’re concerned about how the incoming changes to IHT may affect you and your loved ones, our dedicated Wealth Protection team can help you better understand your position and the options available to you.

Get in touch today on 03333 058375 or by email via [email protected] . We’re here to help.