Inheritance Tax Receipts 2026: How Equity Release Could Help Reduce Your Estate
HMRC collected a record £8.5 billion in inheritance tax during 2025/26. With nil-rate bands frozen until at least 2030 and pension pots entering the IHT net in 2027, the number of estates facing a tax bill is set to rise further. For homeowners in later life, it is worth understanding what tools — including equity release — could form part of a considered strategy.
The inheritance tax picture in 2026
April 2026 saw £0.7 billion in IHT receipts — down £65 million compared with April 2025, but still historically very high. The full 2025/26 tax year delivered a record £8.5 billion, continuing a long upward trend driven primarily by rising property values and static allowances.
The fundamental problem is straightforward: the thresholds have not kept pace with house prices. The nil-rate band has stood at £325,000 since 2009/10, and the government has confirmed it will remain frozen until at least 2030. The Residence Nil Rate Band — available where the family home passes to direct descendants — adds up to £175,000 per person, giving couples a combined threshold of up to £1 million. However, this allowance tapers for estates above £2 million and disappears entirely above £2.35 million.
2025/26 full year: £8.5bn IHT collected — a new record. Nil-rate band frozen at £325,000 since 2009/10, with no increase planned until at least 2030.
Rising house prices mean a growing number of estates exceed the combined £500,000 threshold — or the £1 million couples' threshold — simply through the appreciation of property bought decades ago. This is not a problem only for the very wealthy.
April 2027: pension pots brought within IHT scope
A significant change is coming. From April 2027, unused pension pots will be brought within the scope of inheritance tax for the first time. For many homeowners in later life, pensions have been used as a tax-efficient way to pass wealth to the next generation — untouched during retirement, preserved specifically for inheritance. That approach will become considerably less advantageous once the change takes effect.
The practical consequence is that estates which currently fall below IHT thresholds, or sit just at them, may be pushed above once pension wealth is counted. People who had assumed their estate was comfortably within limits should revisit that assumption before 2027.
How equity release could reduce estate value
Equity release is not primarily an estate-planning product — it is a way for homeowners in later life to access the value tied up in their home. But there are legitimate estate planning dimensions to consider, and these are worth understanding clearly.
When you release equity from your home, you are converting a non-liquid asset (the property) into cash. If that cash is used for living expenses, home improvements, or gifted to family members, it could reduce the overall value of your estate over time.
- Gifts from released funds — money given to family from equity release proceeds could start the seven-year clock on Potentially Exempt Transfers (PETs). If you survive seven years from the date of the gift, it falls outside your estate for IHT purposes entirely.
- Lifetime mortgage on death or care entry — a lifetime mortgage is repaid when you die or move into long-term care. The outstanding loan and accrued interest is settled from the sale proceeds of the property, reducing the net value passed to beneficiaries — and therefore the taxable estate.
- Reducing the gross estate — the act of releasing equity transforms housing wealth into accessible funds. Spent or gifted appropriately, those funds can reduce the estate value that is ultimately assessed for IHT.
It is important to note that equity release is a serious long-term financial commitment, and it could release funds that reduce your estate. Whether these effects are desirable depends entirely on your circumstances, your wishes, and your family's needs. None of this constitutes a guarantee of any specific tax outcome — that requires professional advice specific to your situation.
What equity release does not do
Equity release is not a tax avoidance scheme. It will not eliminate an IHT liability on its own. The rules around gifts, the seven-year PET period, and the treatment of outstanding mortgage balances are all areas where specialist tax and legal advice is essential.
Used well, equity release could form one strand of a broader later-life and estate planning strategy — alongside wills, lasting powers of attorney, trust structures, and pension planning. Used poorly, or without proper advice, it could reduce the estate in ways that were not intended, or create unexpected tax consequences.
All advice provided by Verity Home is FCA-regulated. We work with clients and their wider advisory teams — including tax advisers and solicitors — to ensure that any decision is taken with a complete picture.
Should you be reviewing your estate plan now?
If you are a homeowner in your 60s or 70s, the combination of record IHT receipts, frozen thresholds, and the 2027 pension change is a strong prompt to review your position. The question is not whether to act — it is whether to act by design or by default.
A proper review would consider: the current value of your estate (property, pension, savings, investments); the nil-rate band and RNRB thresholds that apply to you; any planned gifting and whether the seven-year PET clock could be used effectively; whether your pension will bring you within IHT scope from 2027; and whether equity release could form part of a considered response.
This is not a reason for alarm. It is a reason for planning — sooner rather than later, while options are still open.
Want to understand your options? Speak to a specialist later-life lending adviser. No obligation — just plain-English answers to your questions.
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