Inheritance tax: 5 myths worth busting before the Budget

Few things get Britain talking like inheritance tax (IHT). It’s regularly voted the nation’s most hated tax, and it’s had plenty of airtime lately. One party conference has promised to take the family home out of it altogether. Meanwhile, plenty of us are quietly wondering what Rachel Reeves’s successor has up his sleeve for 28 October.

So before the Budget noise really cranks up, let’s clear the air. Here are five of the IHT myths we hear most often, and what’s actually true.

Myth 1: “Inheritance tax is coming for all of us”

For most people, it isn’t. Fewer than one in 20 UK deaths results in an IHT bill.

Let’s look at the averages: the typical pension pot for someone aged 65 to 74 is around £145,900. The average UK house price is about £273,000. Put them together and you get roughly £420,000. That’s comfortably below the £500,000 a single person can usually pass on tax-free when leaving their home to children or grandchildren. It’s nowhere near the £1 million available to married couples and civil partners.

Where you live makes a huge difference. Tax Policy Associates has mapped how many pensioner households would be in IHT territory if they died today. In Wimbledon it’s around half. In Finchley it’s 46%. In Durham it’s about one in 11. In Scotland, the only constituency outside the south of England to make HMRC’s top 20 for IHT paid is Edinburgh South. If you’re in Dumfries or Durham, IHT is far more likely to be a headline than a bill.

That said, the “fewer than one in 20” figure only counts estates that actually paid. The same research suggests that around one in five pensioner households across England and Wales has enough to be in scope on paper. Many will spend, gift or plan their way below the line before it matters, but that’s exactly the point. Thresholds have been frozen since 2009 and unused pensions join the estate from April 2027, so “most people” doesn’t automatically mean you.

Myth 2: “The Tories will scrap it, so why bother planning?”

At this month’s Conservative conference, Kemi Badenoch pledged to exempt family homes from IHT and let couples pass on an extra £1 million tax-free.

We’re not here to tell anyone how to vote, but a conference pledge isn’t law. The next general election isn’t due until 2029, the polls are tight, and the detail is still thin. For example, there’s no cap on the value of a home that would qualify, and no clear answer on how it would be paid for. The party puts the cost at around £6 billion a year; Tax Policy Associates reckons it could be nearer £11 billion.

We’ve seen this before. George Osborne promised a £1 million IHT threshold at the 2007 conference. A version of it eventually arrived, but a decade later and in a rather different shape.

Myth 3: “When I die, my family get everything”

Not necessarily, and this is the one that keeps us up at night.

There’s no such thing as a “common-law wife” or husband in law. If you’re not married or in a civil partnership and you die without a will, your partner has no automatic right to inherit. That holds however long you’ve lived together, and even if you share children or have a wedding booked for next summer. Your estate could pass to your children, your parents or even your siblings, while your partner is left to make a claim through the courts. That process is slow, costly and uncertain.

Even with a will, an unmarried partner doesn’t get the spouse exemption. Anything you leave them above your nil-rate band could be taxed at 40%.

Without a will, even simple jobs like selling the car become surprisingly complicated. The rules of intestacy rarely send things where people assume they’ll go.

Myth 4: “It’s a tax on the dead”

It’s really a tax on the living - you’ll be past caring. It’s your family who’ll be filling in the forms, dealing with HMRC and finding the money.

Which is why, as the saying goes. doing no IHT planning at all works brilliantly - for people who hate their family more than they hate the government.

Myth 5: “They can just pay it when the house sells”

HMRC isn’t that patient. IHT is generally due within six months of death. After that, interest kicks in at the Bank of England base rate plus 4%, which is currently 7.75% a year.

Six months goes quickly. A house might need clearing, repairs or simply a buyer, and a grieving family may not be ready to deal with any of it. Some tax on property can be paid in instalments, but interest still applies. From April 2027, pensions will add another layer of paperwork to an already busy six months.

So what should you actually do?

Probably less than the headlines suggest, but probably more than nothing. Make sure you have an up-to-date will, check where your pension death benefits are going, and get a clear picture of whether IHT is genuinely on your horizon.

We’ll be watching the Budget on 28 October and will share what it means for you shortly afterwards. In the meantime, if you’d like to talk through your own situation, just give us a call.

Please note: Tax treatment depends on your individual circumstances and may change in the future. The Financial Conduct Authority does not regulate will writing, trusts or some forms of tax planning.

The information in this blog was correct as of 14 October 2026.