The upward trajectory of inheritance tax receipts shows no signs of slowing as frozen thresholds, higher volumes of wealth transfers and rising property prices continue to bring more families into scope.
The latest figures from HM Revenue & Customs revealed IHT receipts for April to August this year reached £3.8 billion, which is £0.1 billion higher than the same period last year.
The individual nil rate band has remained at £325,000 since 2009, while property values and other assets have increased considerably over that period. As a result, experts say many families who may not consider themselves particularly wealthy could find that their estates are exposed to a tax liability they had not anticipated.
Amit Joshi, managing director of wealth at Mattioli Woods, said: “Inheritance tax revenues continue to climb as frozen thresholds pull more families into the tax net. Rising property values and inflation are quietly turning what was once a tax for the wealthy into a bill for ordinary households. Estates that would have paid nothing a decade ago are now automatically liable, without a single announcement.
“What is most concerning isn’t the tax itself, but the lack of awareness. Families often only realise the impact when it’s too late to act. Inheritance tax has become a planning issue by stealth, and the cost of inaction is measured in lost choices, rushed decisions, and unnecessary tax.
“Regularly reviewing wills and estate plans, and seeking professional financial advice, is no longer optional. It’s essential to protect family outcomes, preserve control, and ensure hard-earned wealth goes where it was intended, not where it happens to land.”
Nicholas Smith, head of tax at Duncan & Toplis, commented: “The impact goes beyond the amount of tax ultimately payable. An unexpected inheritance tax bill can create practical difficulties for families, particularly where much of an estate’s value is tied up in property or a family business rather than readily available cash. Beneficiaries may find themselves having to make difficult decisions about assets at an already challenging time.”
Inheritance tax receipts are expected to rise further next year, when new rules come into force in April that will see unused defined contribution pensions included in an individual’s estate for IHT purposes.
This change is expected to drag another 10,500 estates into the IHT net that year, hike the amount of tax paid by 38,500 estates and increase the tax due by £34,000 each on average, bringing the importance of early estate planning into focus.
Simon Martin, head of UK technical services at Utmost, commented: “The reach of inheritance tax is continuing to expand, with thresholds now frozen until 2031, Business Property Relief reforms having taken effect earlier this year, and unused pension pots due to fall within the scope of IHT from April 2027.
“While these changes may boost Treasury revenues in the near term, they also raise broader questions about the UK’s competitiveness for entrepreneurs and wealth creators who have more flexibility than ever over where they choose to invest and build businesses.”
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