Rising Inheritance Tax Risks: What London Landlords Must Do Now

Why the Inheritance Tax Spike Matters to Landlords

HM Revenue & Customs (HMRC) recently reported a significant increase in Inheritance Tax (IHT) revenue, reaching a record £8.25 billion in the 2024/25 tax year. This surge is primarily due to the nil-rate band—the threshold below which estates pay no IHT—being frozen at £325,000 since 2009, despite substantial rises in property prices, particularly in London and the South East.

Landlords are especially affected because property often forms a large part of their estate. Data shows that in 2025, 41% of properties sold in England and Wales were valued at or above the £325,000 nil-rate band threshold, a sharp increase from just 13% in 2009. Even with the additional residence nil-rate band (RNRB) of £175,000, which raises the threshold to £500,000 when passing a main residence to direct descendants, many properties exceed this combined limit.

What This Means Across Different Landlord Profiles

• Single-property landlords: Even if you own just one property, if that asset exceeds the nil-rate band, your estate could face a significant IHT bill.
• HMO and multi-unit landlords: With multiple properties, your exposure is compounded, increasing the urgency for robust estate planning.
• Portfolio landlords: Larger portfolios magnify IHT risks. Without strategic planning, your estate could face substantial tax charges.
• Accidental landlords: Those who inherited or acquired property unintentionally may be unaware of their increased IHT exposure.

Practical Implications and Immediate Actions

1. Assess Your Portfolio’s IHT Exposure

Begin by valuing your property assets realistically. For London landlords, consider up-to-date professional valuations given the volatile market. Benchmark these against the current IHT thresholds:

• Nil-rate band: £325,000 (frozen since 2009)
• Residence nil-rate band: Up to £175,000 (subject to conditions)

If your combined property value exceeds £500,000, immediate action is advisable.

2. Review and Update Estate Planning Documents

Consult a qualified tax or legal professional to:

• Update your will to reflect current property values and family circumstances.
• Explore trusts or other vehicles to mitigate IHT liabilities.
• Consider lifetime gifting strategies, bearing in mind the seven-year rule for IHT exemption.

3. Communicate with Tenants and Clients Where Appropriate

While tenants aren’t directly liable for IHT, landlords should be prepared to:

• Advise tenants on the potential impact of estate changes on tenancy agreements.
• Ensure continuity of tenancy management in case of estate transitions.

4. Monitor Legislative and Market Developments

Stay alert to any government announcements on IHT thresholds or reliefs, as these can influence your planning strategies. Similarly, track property market trends to reassess valuations regularly.

Preparing for HMRC Scrutiny

With rising IHT receipts, HMRC is likely to increase estate audits, particularly where property assets are involved. Keep comprehensive records of valuations, transactions, and estate planning documents to support any queries.

Next Steps: Scheduling Your Workflow

• This month: Arrange professional valuations and initial estate review.
• Next 4–6 weeks: Meet with tax/legal advisors to update wills and discuss mitigation strategies.
• Ongoing: Review portfolios annually and adjust plans as property values and family situations evolve.

How Rentals & Sales Can Support You

Our specialist team offers tailored portfolio reviews focusing on compliance, property valuations, and tax exposure analysis. We can coordinate with your legal and financial advisors to ensure your estate planning is robust and aligned with current market realities. Additionally, our compliance audits and pricing strategy services help optimise your portfolio’s performance and risk profile.

Compliance Disclaimer

This article provides general information and does not constitute legal or tax advice. Landlords should consult qualified professionals regarding individual circumstances and before making financial decisions related to inheritance tax or estate planning.