The number of £1 million-plus homes in the UK has hit a record high, with new research from Savills revealing that one in every 42 properties now falls into this category. That’s more than 700,000 homes across the country – and for many homeowners, it raises some serious financial questions, especially around inheritance tax (IHT) liability.

If property prices keep rising, more families could unexpectedly find themselves facing hefty tax bills. So, what does this mean, and what can you do about it?

Where Are the £1 Million Homes?

Unsurprisingly, London dominates the million-pound property market, with just under 350,000 homes now valued at £1 million or more. That means one in every 11 homes in the capital has reached this milestone – an all-time high.

Other key regions include:

• South East England – home to around 160,000 million-pound properties
• The East of England, South West, and Wales – seeing a decline in £1 million homes, thanks to a cooling market outside major cities

The shift back towards city living has been driven by the return-to-work movement, with London experiencing a resurgence in demand. According to Lucian Cook, head of residential research at Savills, this trend has pushed 5,000 additional properties over the £1 million mark in 2024 alone.

Why This Matters for Homeowners

For many people, property wealth has been steadily growing over the years, but there’s a hidden downside – tax liabilities. With more homes crossing the £1 million threshold, homeowners need to think carefully about how their wealth is structured, particularly when it comes to inheritance tax (IHT) and retirement planning.

Inheritance Tax: Who’s Affected?

Inheritance tax is charged at 40% on estates worth over £325,000 per person. However, homeowners benefit from a £175,000 residential nil-rate band, meaning that up to £500,000 of an individual’s home can be exempt from IHT.

For married couples or civil partners, these allowances are combined – so they can pass on a home worth up to £1 million tax-free.

The problem? If you have other assets – such as savings, investments, or a second property – your estate could still be liable for IHT, pushing your loved ones into an unexpected tax bill.

Retirement Planning: Don’t Rely Too Heavily on Property

Rising house prices might seem like a great safety net for retirement, but relying too much on property wealth can be risky. Market conditions fluctuate, and selling a home at the right price when you need to downsize isn’t always easy.

Balancing property, pensions, and other assets is key to long-term financial security. A mix of income sources will ensure you’re not left at the mercy of the housing market when it comes to funding retirement.

What Can Homeowners Do?

If you’re concerned about inheritance tax or how to structure your wealth for the future, there are steps you can take:

• Estate Planning – Make sure your will and financial arrangements reflect your wishes and minimise tax liabilities.
• Gifting Strategies – You can gift money or property to family members before you pass away to reduce the taxable value of your estate.
• Pension and Investment Planning – Using a mix of pensions, ISAs, and other investments can help reduce reliance on property and optimise tax efficiency.
• Equity Release (if suitable) – Some homeowners use equity release to access funds without selling, but this needs careful consideration.
• Get Professional Advice – Speaking to a financial adviser can help you structure your wealth effectively, ensuring you and your family are in the strongest financial position.

Is it time to review your pension?

Owning a million-pound home might feel like a mark of financial success, but without careful planning, it could also bring unexpected tax headaches.

With more UK homeowners crossing the £1 million threshold, now is the time to review your financial position, explore tax-efficient strategies, and plan for the future. Whether it’s inheritance tax, retirement funding, or wealth management, taking action now can protect your assets and provide financial security for your loved ones.