UK inheritance tax versus peers

A comparison of UK inheritance tax with peer nations, focusing on gift exemptions, rates and potential costs for homeowners.

How UK inheritance tax compares with other countries

A recent change to inheritance tax rules could raise costs for families. The government reclassified unspent pension savings as part of the estate for IHT, regardless of age at death, a shift highlighted by Quilter’s analysis. A typical working-age single homeowner in England with a £290,395 home and £415,000 pension could face an IHT bill around £82,158.

Across the OECD, the UK stands with a small group that taxes estates rather than recipients. Many peers apply taxes to recipients or use progressive rates. Belgium taxes up to 80 per cent in some inheritance cases. The UK offers a higher exemption threshold but keeps a 40 per cent rate. OECD figures show UK IHT revenue sits in the upper half of member nations as a share of GDP, with revenues higher than the US or Ireland but well below Belgium, France or South Korea. Some countries have reduced or abolished IHT in recent decades, illustrating a shifting global landscape.

The changes point to a broader shift in how governments balance fairness, savings and revenue. Making pension savings count toward the estate tightens the link between retirement planning and tax outcomes, especially for middle-income homeowners. It also heightens questions about intergenerational equity and the tax burden on families who save across decades. Reformers argue the system should curb large, untaxed gifts; critics warn it adds complexity and could slow long-term planning.

Highlights

Tax policy tends to reveal a society’s long-term priorities as much as its budgeting choices.