Calculations from Interactive Investor, the DIY investment group, show that 45-year-olds earning the national average salary of £35,000 will have a projected inheritance tax bill of £194,529 at the age of 68.
Experts said the tax, which is presented as something only paid by the wealthiest estates, is “increasingly a tax for all”.
Myron Jobson, senior personal finance analyst at Interactive Investor, said: “The stark reality is that the IHT net is expanding, increasingly ensnaring people with modest assets.”
Rising house prices and pension changes
Jobson said rising house prices and changes to pensions are to blame for the widening net. The Government is planning to put pension assets, currently outside estates for inheritance tax purposes, into scope for the tax from April 2027, while the freezing of inheritance tax thresholds at a point when house prices are rising has meant many more estates already pay the tax.
Interactive Investor said figures obtained from the Office for Budget Responsibility (OBR) show that 31,200 additional estates will become liable for inheritance tax by the end of the 2029/30 tax year if the proposed changes are implemented, with a further 121,500 estates facing increased inheritance tax liability.
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He said: “The evolving IHT regime continues to be a major revenue stream for the Government, with IHT receipts reaching record highs between April 2024 and March 2025, and likely to keep rising.”
IHT bills for the lower paid
For a 45-year-old earning the national average wage of £35,000, the projected inheritance tax bill at age 68 is £194,529, Interactive Investor calculated. The figure rises to £218,992 and £267,914 for those with salaries of £50,000 and £80,000 respectively.
This estimate assumes pension contributions of 8% of salary (the minimum for automatic enrolment) and a 2% annual increase in property value and wages, which would also boost pension contributions over time. It also assumes that the £325,000 nil-rate band is available on their death.
Taking down the tax bill
Jobson said there are several ways people can take down their inheritance tax bill, including giving more to loved ones using inheritance tax gifting rules.
Recent analysis by Interactive Investor shows how making regular gifts using inheritance tax gifting exemptions – rather than a one-off lump sum – could save families up to £37,000 in tax.
“It’s crucial not to overlook your own financial needs in later life – you don’t want to find yourself financially stretched in retirement,” Jobson added.
