As a trusted estate agent in North Hampshire and Surrey, we believe it’s important to understand on how tax policy and the property market interact, because we believe proactive thinking will benefit our clients.
Inheritance Tax is charged on a person’s estate when they die — that means all their assets (property, money, possessions) minus debts. The standard tax‐free threshold (nil‐rate band) is £325,000 for 2025/26, whilst the basic rate of is currently 40% on the portion of the estate above that threshold.
Where many homeowners’ biggest asset is their home and because property values have risen significantly in recent years, more of that “estate value” may now sit above the threshold — meaning there is a higher chance of IHT liability.
There’s a special allowance called the “main residence nil-rate band” (RNRB) which can increase the tax‐free amount if the home is being left to direct descendants (children/grandchildren) and certain other criteria are met. For example, for 2025/26 the residence allowance is £175,000.
That means, in some cases, an individual homeowner could pass on up to about £500,000 tax-free (i.e., £325k nil‐rate band + £175k residence band) — and for a married couple that potential goes up to about £1,000,000 (where both sets of allowances apply).
However, this relief isn’t automatic, and there are important caveats, which we’ll cover below.
Thresholds are slow to move
The nil‐rate band (£325k) has been unchanged for many years, despite inflation and rising asset values. As a result, homes that decades ago would have been comfortably under the threshold may now push estates over it.
In the context of property, that means that even families of moderate means may now face IHT exposure purely because their home value has risen.
Having said that, there is speculation that this could change in the November budget.
Property value growth
Higher house prices mean the value of many homeowners’ estates is increasing — which boosts the “estate value” for IHT purposes. It doesn’t matter that you didn’t explicitly buy the home for tax purposes; if you own the home and it’s part of your estate, it counts.
Changing behaviour of homeowners
Due to the above, more homeowners may consider downsizing or accelerating a move, with carefully considered timing to mitigate exposure. If you’re a homeowner thinking ahead, these are actions you may wish to consider.
Local markets matter
We operate in a region where typical property values are higher than national averages, so the “exposure zone” is even greater. In those areas, even “ordinary” homes may now fall into a band where tax planning is relevant.
Homeowners who see tax exposure may consider selling sooner and downsizing to a lower value property. This could benefit you in other ways; having a smaller home may be more comfortable and easier to maintain.
We strongly recommend seeking a qualified professional for tax advice, yet we would suggest starting with the following;
Find out your current estate value (including home, savings, investments).
It’s helpful to have a rough estimate of your total estate including your property. If the total is near or above the combined allowance thresholds (nil‐rate band + residence band) then you’ll know whether to review your options.
Is your home likely to be passed to your children or grandchildren?
The enhanced residence allowance only applies when the home is left to direct descendants. If your estate plan leaves the property to someone else (e.g., a sibling, friend, other relative) the allowance may not apply.
Have you thought about the timing of any move, sale or downsizing?
If you’re already thinking of moving anyway, doing so before tax changes or before estate value rises further could be sensible. From our vantage point, we can help you understand the current market conditions and if now might be a good time.
Would relocating to a smaller property reduce your long-term tax exposure?
For some owners, moving to a smaller property may reduce future tax exposure — while also freeing up capital.
Have you looked at “residence nil‐rate band” rules and conditions?
For example; you must have owned the property, at some point lived in it; you can only apply the residence allowance to one property; if you’ve downsized or sold your home and then passed assets instead, there are transitional rules.
Are you aware of potential tax policy changes in the pipeline?
While neither we nor any estate agent can advise on future tax policy, it’s worth noting that tax thresholds and reliefs are periodically reviewed — and the risks of being ‘caught’ increase if you leave things until the last minute.
How we can help
At Mackenzie Smith, our expertise covers more than just listing homes. We can help you think through timing, valuation, and market conditions so that you make informed decisions about your property in the wider context of your lifetime plan.
Here’s what we offer:
Referrals to trusted professionals — While we don’t provide tax advice, we work with independent financial advisors who can review your IHT exposure, estate plan and potential reliefs.
Whilst it comes with complex considerations, homeownership in the UK continues to offer enormous value and opportunity. Whether you’ve owned your home for decades or you’re in the prime of life considering your next move, now is a good time to ask how your home fits into your lifetime plan.
If you’d like to discuss your home’s value, your options for moving or restructuring, or simply get a better sense of the local market, please feel free to get in touch with your local office. We’ll be happy to help.
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