Inheritance tax receipts have increased again as frozen thresholds continue to boost the tax take for the Treasury.
Income to the government from inheritance tax (IHT) for April to June 2025 was £2.22 billion, the latest HMRC figures show. This is an additional £134 million compared to the same period in 2024.
It means inheritance tax revenues for this financial year so far are running 6% ahead of the same period last year, which was a record one.
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The Office for Budget Responsibility's most recent forecast, published at the Spring Statement, projects another record year coming with IHT predicted to generate £9.1 billion for the Treasury in 2025/26. Revenues are expected to raise more than £14 billion in the 2029/30 financial year.
Ian Dyall, head of estate planning at wealth management firm Evelyn Partners, said: “Even with the relative softness in the property market suggested by recent house price indices, the trend for more families and more assets attracting IHT liabilities is set to continue as nil rate bands remain frozen.”
Frozen inheritance tax thresholds
Property prices and equity valuations remain at or near all-time highs, Dyall pointed out, while the threshold for the main nil rate band of inheritance tax has been stuck at £325,000 since 2009, and the main residence nil rate band has remained at £175,000 since April 2020.
As well as the boost to IHT receipts that comes from fiscal drag of frozen allowances, the Treasury will be hoping for more inheritance tax revenue once business property relief and agricultural property relief are watered down from next April, and then unspent pension funds become subject to IHT calculations from April 2027.
“There’s likely to be big jumps in IHT liabilities across the UK, and not just in the South East where they are traditionally concentrated,” said Dyall.
How to reduce inheritance tax
Households however can take action to avoid inheritance tax. This could include using annual gifting allowances, drawing down on their pensions to spend or gift some funds, or making larger lump-sum gifts to hopefully reduce their IHT bill.
Many people might need to look at their will and death benefit nominations afresh to accommodate the new inheritance tax rules on the horizon, said Dyall.
Others still might think it worth insuring their beneficiaries against a growing inheritance tax burden by writing whole of life insurance policies into trust, he added.
“What families shouldn’t do as the Budget reforms change the rules of estate planning, is nothing; and neither should they take drastic steps themselves without professional advice,” Dyall said.
“Estate planning really is an area where expert advice can not just prevent costly mistakes but also keep a higher proportion of assets in the family.”
Anyone who is uncertain or concerned that their estate may be subject to inheritance tax should get an up-to-date valuation of their estate, including a recent assessment of their property wealth.
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