HMRC’s latest figures show inheritance tax (IHT) receipts reached a record £8.5bn in the 2025/26 tax year, marking the fifth consecutive annual increase.
Rising property values, frozen thresholds and legislative changes mean more estates are being drawn into the IHT net. As a result, many families are increasingly concerned about whether the tax could affect the wealth they plan to pass on to future generations.
Why are inheritance tax receipts rising?
IHT is charged on the value of an individual’s estate, including property, savings and other assets. While the standard rate remains at 40% on assets above the available thresholds, several factors are contributing to increasing receipts…
Rising asset values
Continued growth in property prices and investment portfolios means more estates are exceeding available allowances. For many people, the family home alone represents a significant proportion of their total wealth, increasing the likelihood of an inheritance tax liability.
Frozen thresholds
The nil-rate band (£325,000) and residence nil-rate band (£175,000) remain frozen until at least April 2031. As asset values increase, more estates are gradually being brought into scope through fiscal drag.
Changes to reliefs and pensions
Recent changes to Business Property Relief (BPR) and Agricultural Property Relief (APR), effective from April 2026, have added further complexity. In some cases, assets previously expected to qualify for relief may now be subject to an IHT charge.
Looking ahead, from April 2027, unused pension funds and certain death benefits are expected to form part of an individual’s estate for IHT purposes, potentially increasing exposure for many families.
Together, these developments mean inheritance tax is no longer a concern only for the wealthiest estates – and more families may now need to consider planning.
Planning opportunities to consider
Although IHT rules can be complex, reviewing your position now may help preserve more of your wealth for future generations.
Make use of allowances and exemptions
The annual gift exemption of £3,000, together with exemptions for gifts made out of surplus income, can help reduce the value of your estate over time.
Consider lifetime gifting
Lifetime gifts can be an effective way to pass on wealth, provided you understand the seven-year rule and how potentially exempt transfers operate. When structured correctly, they can reduce the value of your estate for inheritance tax purposes.
Review business and agricultural assets
Given recent changes to reliefs, it is important to review how business and agricultural assets are structured and whether they continue to qualify for available reliefs.
Consider the use of trusts
Trusts can be an effective way to pass assets to beneficiaries while retaining a level of control over how and when those assets are accessed. In some cases, they may also provide IHT planning opportunities.
Consider charitable giving
Leaving part of your estate to charity can reduce your overall IHT liability and, in certain circumstances, lower the rate of tax applied to the rest of your estate.
Review your will and estate plan
Your will should reflect both your wishes and your current circumstances. Regular reviews can help ensure your estate planning arrangements remain appropriate and tax-efficient.
Take a holistic view
Effective estate planning should consider all aspects of your wealth – property, pensions, investments and business interests – to ensure everything works together efficiently.
How we can help
With thresholds remaining frozen and further legislative changes on the horizon, reviewing your position sooner rather than later can help ensure valuable planning opportunities are not missed.
Our tax specialists work with individuals and families to provide clear, practical guidance on inheritance tax and estate planning. We can help you:
- Assess your potential IHT exposure
- Identify opportunities to mitigate tax
- Review your existing estate planning arrangements
- Ensure your affairs are structured as efficiently as possible
If you have not reviewed your estate plan recently, now is an ideal time to do so.
To discuss your inheritance tax position, contact our tax team at enquiries@pmm.co.uk to arrange a confidential discussion.
