Inheritance tax gaps widen in London

London estates paid £1.53 billion in 2022-23, driven by frozen thresholds, while Scotland, Wales and Northern Ireland combined paid far less.

The inheritance tax hotspot that pays ten times as much as Wales

London estates paid £1.53 billion in the 2022-23 tax year, according to HM Revenue & Customs data, triple the total from Scotland, Wales and Northern Ireland. The average London bill was about £300,000, compared with £213,000 nationally. England as a whole paid £6.175 billion, with the UK total at £6.7 billion. The figures come as policymakers weigh changes to the inheritance tax regime in the autumn budget, including a potential cap on lifetime gifts.

The data highlight how financial thresholds and high property values concentrate the tax burden in the capital. Frozen thresholds mean more estates cross into IHT as wealth builds in London’s property market, widening regional differences and raising questions about fairness and planning across the country.

The numbers expose structural bias in the tax system. Wealth tied to London’s housing market naturally piles up here, and frozen thresholds magnify that effect year after year. Reform talks tend to surface around revenue needs, but they also touch on issues of regional inequality and who gets to pass wealth to the next generation.

If policy moves bite into lifetime gifts, living families could feel the impact even as estates pay less or more. That could shift behavior, from gifting to charitable bequests, and risk unintended consequences for families and small businesses who rely on careful planning.

Highlights

Policy debates will test how much wealth should be taxed and where that burden belongs.