Inheritance tax receipts reached £7 billion between April 2024 and January 2025, an increase of £0.7 billion on the same period last year.
HM Revenue & Customs said higher receipts in September and October 2024 can be partially attributed to a small number of higher-value payments than usual.
The figures put the Treasury on track to surpass the record £7.5 billion collected in the 2023/24 tax year, with experts warning that frozen IHT thresholds, coupled with government plans to include pensions in IHT from 2027, will lead to more people being affected by the tax.
Shaun Moore, tax and financial planning expert at Quilter, said the relentless rise in IHT receipts is “baked into government policy”.
“With the nil-rate band and residence nil-rate band frozen until 2030, more and more families are being dragged into paying the tax. Rising house prices, particularly in the South East, mean many people that don’t consider themselves to be wealthy will now find themselves above the threshold and facing a 40% bill.”
Moore said farmers and business owners are also feeling the pressure, as the upcoming reforms to Agricultural Property Relief and Business Relief could force more family farms and small enterprises into difficult decisions about their futures.
He added: “A tax once aimed at the wealthiest estates is now creeping further into the middle class, and with unspent pensions set to be taxed from April 2027, the Government’s IHT windfall is only set to grow.
“Inheritance tax remains one of the most resented taxes in the UK, yet the Government is changing policy so more people than ever will pay it. Without reform, families will continue to find themselves hit with unexpected tax bills on what they hoped to pass down.”
Jonathan Halberda, specialist financial adviser at Wesleyan Financial Services, commented: “IHT receipts are only going to keep rising and more and more estates are likely to find themselves falling within its scope, especially when pensions become subject to IHT from April 2027.
“Recently, I’ve been seeing an increasing number of people try to manage their IHT risk by making DIY plans which often involve gifting money to loved ones. While these strategies can be effective, the IHT rules are complicated and people should be careful not to put themselves in a worse position by inadvertently falling foul of them.”
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said the firm expects people to start taking action sooner rather than later to mitigate their IHT liability.
She explained: “Gifts of any size fall out of your estate after seven years so we can expect to see people start to gift assets to loved ones now so they can start the countdown ticking. We will also likely see people start to use the various gifting allowances available, such as the £3,000 annual exemption, to reduce the size of their estate.
“Gifting out of excess income will also prove popular. However, it’s really important that detailed records are kept as gifts need to be proved to be made regularly and out of your surplus income to meet the rules.”
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