A home purchased in Birmingham in 2025 was seven times more likely to expose a family to inheritance tax (IHT) than in 2009, according to new research by law firms Shakespeare Martineau and Lime Solicitors.

Analysis of HM Land Registry’s price paid data reveals that in 2009, just 3 per cent of all property purchases in Birmingham (284 of 8,663) were at or above the £325,000 IHT threshold. By 2025, that proportion had surged to 22 per cent (1,990 of 9,114).

The £325,000 nil-rate band has remained frozen since 2009 and is set to stay at that level until at least 2031, despite sustained house price growth and inflation – steadily pulling more households into the inheritance tax net.

Julia Rosenbloom, tax partner and chartered tax adviser at Shakespeare Martineau, said: “When modern inheritance tax – originally introduced as estate duty in the late-1800s – was created, it was designed to apply only to the very wealthy.

“However, with the tax-free allowance frozen for almost two decades, rising property prices have steadily drawn more families into the scope.

“Many people assume inheritance tax will never affect them. But as our analysis shows, a growing proportion of homes now approach or exceed the £325,000 threshold – before savings, investments or personal possessions are even considered.

“With inheritance tax charged at 40% above the threshold, families can be left facing a substantial and unexpected bill at an already difficult time.”

Inheritance tax is payable when an estate – including property, savings and possessions – exceeds £325,000. The standard rate is 40% on the value above that threshold.

In the latest financial year (2024/25), inheritance tax receipts reached a record £8.25 billion, up from £7.5 billion in 2023/24.

Where a main residence is left to direct descendants, the residence nil-rate band can increase the tax-free allowance by up to £175,000, potentially lifting the total threshold to £500,000.

However, number of homes purchased for £500,000 or more in Birmingham has also increased over the same period (6% in 2025 compared with 1% in 2009).

Julia highlighted pension reforms and upcoming changes affecting business owners and farmers.

She said: “From 6 April 2027, most unused pension funds and death benefits will be included within an individual’s estate for inheritance tax purposes and taxed at up to 40% – ending the long-standing exclusion of pensions from the IHT net.

“Additionally, certain reliefs – agricultural property relief and business property relief – can reduce the taxable value of qualifying assets by up to 100%.

“From 6 April 2026, the 100% relief will be capped at £2.5 million of combined agricultural and business assets, with any excess receiving only 50% relief, though it was originally expected to be capped at only £1 million.

“Anyone with business or agricultural assets should take steps to ensure they qualify for these valuable reliefs, which have strict conditions. Individuals with particularly valuable businesses or farms may need to consider additional planning to manage the inheritance tax liabilities that could otherwise arise on their death.

“Combined with rising property values and a frozen nil-rate band, these changes could substantially increase exposure for many households.

“There are legitimate and effective steps people can take to mitigate inheritance tax and ensure more wealth passes to loved ones rather than HMRC but the rules are complex and mistakes can be costly.

“While there is a wide range of planning options available, each comes with its own technical requirements. Taking tailored legal and tax advice is essential to avoid inadvertently triggering additional liabilities.”

As estate values increase – and as pensions begin to fall within the inheritance