Your home is one of your largest assets and the value is likely to have increased considerably over time.
According to data from the Land Registry, the average house price in May 1996 was £52,166. By May 2026, this figure had increased to £268,132.
This is good news if you’re a homeowner because it means your estate has grown, and you have more wealth to pass to your loved ones. Additionally, you could release a portion of your property wealth to help fund your retirement or meet other important goals.
However, rising house prices could also mean you and your family pay more tax.
Read on to learn three reasons why and how the right plan could help.
1. You could be more likely to exceed important Inheritance Tax thresholds
When you pass away, the executor of your will must calculate how much Inheritance Tax (IHT) is due on the estate.
To do this, they add up the total value of all your taxable assets, including your home. Any portion of your estate that exceeds the “nil-rate bands” is subject to 40% IHT.
In 2026/27, you benefit from:
- A £325,000 nil-rate band
- Up to £175,000 residence nil-rate band, which applies when passing your main home to a direct descendant such as a child or grandchild.
This gives you a total of £500,000 you can pass on without IHT. Additionally, you can pass your entire estate to a spouse or civil partner without IHT, and they inherit your unused nil-rate bands.
As a result, on the second death, a couple can pass up to £1 million to their beneficiaries before any IHT is due.
This may seem like a significant amount, but it’s important to note that the nil-rate band has been frozen since 2009, while the residence nil-rate band hasn’t increased since 2020.
Both thresholds will remain at the current level until at least April 2031.
Meanwhile, Land Registry data shows that the average house price in April 2020 was £212,160. As discussed earlier, this had increased to £268,132 by May 2026.
This is a difference of more than £50,000.
As such, while the nil-rate bands remain frozen, rising house prices take up a greater proportion of your IHT-free thresholds. This could mean that your loved ones pay more IHT on your estate when you’re gone.
Further to this, if the net value of your estate is more than £2 million, your residence nil-rate band tapers away. The allowance will fall by £1 for every £2 that your estate exceeds the threshold. Once the overall value of your estate reaches £2.35 million, you will lose your residence nil-rate band altogether.
It’s important to keep this in mind because if house prices rise and push the combined value of your assets over £2 million, your IHT liability could increase significantly.
2. The Capital Gains Tax on second homes could be greater
If you own multiple properties, you might pay Capital Gains Tax (CGT) when selling any that aren’t your main home.
CGT is a levy on profits you make from selling qualifying assets, including properties. As of 2026/27, the first £3,000 you earn each year is free from CGT. This is your Annual Exempt Amount.
Any further profits are taxed at a rate of:
- 18% if you’re a basic-rate taxpayer
- 24% if you’re a higher- or additional-rate taxpayer.
As property prices increase, you will earn more profits from a sale, but you will also pay a greater amount of CGT.
For instance, if you purchased a property for £300,000 and later sold it for £350,000, you would make a gain of £50,000.
Provided that was your only gain in that tax year, you would pay CGT on £47,000 after applying the Annual Exempt Amount of £3,000.
If you are a higher-rate taxpayer, this leaves you with a bill of £11,280.
However, if you’d held on to the property and the value increased to £370,000 before selling it, you would pay CGT on £67,000.
This would mean a bill of £16,080.
Although you’re still better off, it’s important to consider how rising property prices might affect an eventual CGT bill when you decide to sell.
3. You could be liable for the “mansion tax” in the future
In her most recent Budget, chancellor Rachel Reeves announced the new High Value Council Tax Surcharge, better known as the “mansion tax”.
The government will start collecting this tax on high-value properties from April 2028. However, it’s important to note that any property that was valued at £2 million or more from April 2026 onwards will be liable.
The level of additional tax payable depends on the value of the property.
As the owner of the property, you must pay this tax, so even if it is a rental and the tenant covers the Council Tax, you will still face this extra cost.
If property values rise considerably over time, your home could exceed the £2 million threshold, meaning you trigger the mansion tax.
We can help you manage your tax liability
As property values rise and you face a greater tax bill for the reasons discussed above, it’s important to consider ways to manage your liability.
We can support you with this in several ways.
For instance, we can explore options for reducing the size of your estate for IHT purposes by gifting wealth while you’re alive. This might offset some of the increased IHT liability caused by a more valuable property.
Additionally, if you’re selling a property on which CGT may be payable, we can help you plan other disposals and spread them out to make the most effective use of your Annual Exempt Amount.
Get in touch
To learn more about ways to mitigate a large tax bill, please give us a call on 01276 855717 or email info@braywealth.com today.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
HM Revenue and Customs’ practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.
Approved by the Openwork Partnership on 12/06/2026
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