Families across London could face some of the highest inheritance tax (IHT) bills in the UK when new rules bringing pensions into estate calculations take effect in April 2027, according to new analysis from The Private Office (TPO).

The research shows Kensington and Chelsea is the UK’s most expensive inheritance tax hotspot, where the average property alone could generate an estimated £343,924 inheritance tax bill. When pensions are included in estate calculations under the proposed reforms, this rises to £405,211, with the average estate exceeding £1.3 million.

Across the capital, high property prices mean many households already sit close to the current inheritance tax threshold of £325,000, which has been frozen until 2030/31. The addition of pension wealth to estates could push thousands more London families into the 40% tax bracket.

The findings come as UK inheritance tax receipts reached £8.25 billion in 2024/25, with projections suggesting this could exceed £9 billion by 2026/27, driven largely by rising property values and frozen tax thresholds.

London Boroughs Dominate the Inheritance Tax Hotspot Rankings
Analysis combining Land Registry property values across 372 UK local authorities with estimated pension pot values based on local median earnings reveals that London boroughs dominate the areas most exposed to inheritance tax once pensions are included.

Several London boroughs could see average estates approaching or exceeding £900,000, resulting in six-figure tax bills.

Local Authority
Avg Property Value
Est. IHT Without Pension
Est. Pension Pot
Est. IHT With Pension
Kensington & Chelsea
£1,184,811
£343,924
£153,216
£405,211
Camden
£800,930
£190,372
£180,019
£262,379
Hammersmith & Fulham
£738,593
£165,437
£169,462
£233,222
Richmond upon Thames
£767,961
£177,184
£137,884
£232,338
Islington
£685,840
£144,336
£178,702
£215,817
Wandsworth
£688,570
£145,428
£144,598
£203,267
Hackney
£625,292
£120,117
£163,713
£185,602
Southwark
£596,674
£108,670
£168,000
£175,870
These estimates do not include the Residence Nil Rate Band, which can add £175,000 per person if a property is left to direct descendants.

152 New Areas Could Be Dragged Into the Inheritance Tax Net
From 6 April 2027, most unused pension funds and death benefits will be included within an individual’s estate for inheritance tax purposes. Historically, pensions sat outside IHT calculations.

By combining property prices with estimated pension savings, the analysis shows 152 local authorities that were previously below the tax threshold could become liable for inheritance tax once pensions are included.

This would bring the total number of local authorities with potential inheritance tax exposure to 288 across the UK.

While the biggest tax bills remain concentrated in London and the South East, the reform could also push families in mid-priced regions into inheritance tax for the first time.

Areas such as Stevenage, Tewkesbury, Warwickshire and Gloucestershire could see estates move above the threshold once pensions are included, creating estimated tax liabilities between £10,000 and £60,000.