Nearly half of UK inheritance tax paid by London and the South East as bills rise to £6.7bn

The number of estates paying inheritance tax in Britain rose by 12% in the 2022-23 tax year, as 31,500 families contributed a combined £6.7 billion to the Treasury, according to analysis of HM Revenue & Customs data.

The increase pushed the proportion of deaths that produced an inheritance tax bill to 4.62% and came even as the average amount paid per liable estate slipped slightly to about £212,000 from £215,000 the previous year. Nearly half of the total liability was concentrated in London and the South East, highlighting a strong regional disparity in who meets the tax threshold.

England accounted for £5.63 billion of the total, with London responsible for £1.53 billion and the South East £1.45 billion. Together those two regions made up about 44% of the IHT liabilities recorded for 2022-23. Analysts say the distribution reflects the extent to which property comprises household wealth in the South, and the effect of frozen tax thresholds as house prices rise.

Home price data cited by the analysis show the average London house price at about £672,989, compared with £428,646 in Kent and £422,015 in Essex. "With house price growth slowing, however, this may no longer be the engine driving the inheritance tax take in future," James Ward, head of the private client practice at law firm Kingsley Napley, which collated the figures, said. He added that an upcoming change to make pensions subject to inheritance tax from April 2027 is likely to reshape which estates fall into liability.

Ward said the pension change is expected to add roughly 10,000 more estates to HMRC's scope and to increase estate values by an average of about £34,000 when pension assets are included. The policy change, together with proposals under discussion in Westminster such as a possible lifetime gifting cap, could increase the number of families affected by IHT, tax experts say.

At constituency level, Kensington topped the list for the largest IHT take, contributing about £154 million from 112 estates in 2022-23, followed by Chelsea and Fulham with £107 million from 96 estates and Finchley and Golders Green with £103 million from 183 estates. Cities of London and Westminster recorded about £85 million; Hampstead and Kilburn £84 million; and Richmond Park £71 million, where 184 estates were liable compared with 145 the previous year.

Outside London and the South East, the South West recorded the highest number of liable estates and the largest IHT total. The Cotswolds constituency led areas outside the capital, with £39 million paid across 115 estates. Torridge and West Devon also paid £39 million but across just 73 estates. The East of England produced about £653 million from 3,259 estates.

At the other end of the spectrum, the North East of England, Northern Ireland and Wales recorded the fewest estates paying IHT. Northern Ireland recorded 76 liable estates amounting to £11 million, though data were available for only two of 11 constituencies. The North East recorded £31 million across 163 estates, and Wales contributed about £82 million from 622 estates.

Some constituencies reported only modest sums: Cleethorpes, Newport West, South Swindon, Slough and Dumfries and Galloway each recorded around £3 million in IHT receipts for 2022-23, while other lower-earning areas reported totals in the low millions.

Tax specialists and political figures have noted that a combination of frozen allowances, demographic trends and the composition of household assets means the pattern of liability is likely to shift only slowly unless policy changes are introduced. Freezing the nil-rate band and residence nil-rate band thresholds in real terms raises the chance that rising property and pension values will sweep more estates into charge.

Policymakers are already debating reforms. Labour's shadow chancellor, Rachel Reeves, has been reported to be considering a lifetime gifting cap as one possible measure to address perceived inequities in how wealth is passed on. Meanwhile, the government has set the inclusion of pensions in estate calculations for April 2027, a move that the analysis estimates will increase both the number of liable estates and the average estate valuation.

The interactive constituency-level map published alongside the analysis allows households and advisers to see how many estates in each area paid IHT and the total sums recorded. The detailed breakdown underscores how concentrated inheritance tax receipts are geographically and signals the potential impact of policy changes scheduled to take effect in coming years.