HMRC reported that Inheritance Tax (IHT) receipts reached £800 million in April 2025—a £97 million increase compared to April 2024. This is the second-highest monthly total on record and continues a long-term trend of rising IHT revenues. The growth is driven by frozen tax thresholds, rising asset values, and legislative reforms broadening the IHT net.

The Office for Budget Responsibility (OBR) estimates that IHT receipts will exceed £9 billion in 2025/26, up from £8.2 billion in 2024/25. By 2030, nearly 1 in 10 estates are projected to fall within the IHT threshold.

Tax partner Roger Phillips explains more…

Understanding the rise in IHT Receipts

Inheritance Tax is charged at 40% on the portion of an estate exceeding certain thresholds. Several trends and policy decisions are fuelling the recent increases:

1. Rising property values
   Property price inflation—especially in London and the South East—means even modest homes now breach the nil-rate band (£325,000), pushing more estates into the IHT net.
2. Frozen thresholds until 2030
   Both the nil-rate band (NRB) and the residence nil-rate band (RNRB) remain frozen at £325,000 and £175,000 respectively until April 2030. This long-term freeze effectively pulls more estates into IHT liability through fiscal drag.
3. Major legislative changes announced in the 2024 Autumn Budget

• Business and Agricultural Relief caps (from April 2026): reliefs for business and agricultural property will be capped at £1 million each and any value above this cap will attract only 50% relief. This marks a significant shift, particularly for estates involving farms or private businesses, which could now face substantially higher IHT bills.
• Pension death benefits (from April 2027): undrawn pension funds and death benefits will be included in the deceased’s taxable estate—potentially increasing many families’ IHT exposure.
• Non-dom regime changes (from April 2025): The abolishment of the non-dom regime and replacement with a residence-based system is set to bring more individuals within the UK IHT scope.

Next Steps: how can families respond?

With more estates falling into the IHT bracket, proactive and timely estate planning has never been more critical. Key steps you can take include:

• Make use of allowances and reliefs
  Various allowances and reliefs can reduce your IHT liability, including the annual gift exemption (£3,000 per year) and reliefs for gifts made out of surplus income.
• Lifetime gifting
  Gifts made during your lifetime beyond the annual exemption can start the required seven-year clock. Gifts to registered charities are usually exempt from IHT, which can help reduce the overall taxable value of your estate.
• Utilise trusts
  Establishing trusts can be a strategic way to pass assets to beneficiaries while minimising IHT. Trusts also offer control over how and when assets are distributed and can provide tax advantages. If trust planning is being considered, it may well be sensible to have completed this before 6 April 2026, before the rules change, as currently there may be the possibility to make transfers of business property into trust before then, without incurring significant tax charges. Advice should always be sought.
• Review your will regularly
  Ensure your will reflects your current financial situation and estate planning goals. This helps ensure your assets are distributed according to your wishes while taking advantage of available reliefs.
• Take early action
  Following the 2024 Autumn Budget announcements, many families will need to rethink their succession planning strategies. Given the impending changes, a proactive approach is vital. Reviewing asset values and understanding the IHT implications under the new rules is an important first step. This may involve restructuring ownership, exploring trusts, or other tax-efficient vehicles to manage potential liabilities.
• Obtain professional advice
  Given the complexity of these rule changes and looming reforms, expert tax and estate planning advice is essential to build a robust strategy tailored to your circumstances. Working closely with a tax adviser can help optimise asset allocation, utilise alternative reliefs, and establish succession structures that minimise tax impact on business continuity and family legacies.

Get in touch

The sharp rise in IHT receipts signals that is time for families to act sooner rather than later. With significant changes on the horizon, proactive planning today can mean substantial tax savings in the future.

If you’d like to discuss your personal circumstances and how these changes might affect you, get in touch with Roger Phillips by clicking the button below.