Inheritance tax receipts fall to £0.7 billion in April – why more estates could be set to pay the ‘death tax’
The government took £0.7 billion in inheritance tax in April, a fall from the same month in 2025, but more estates are likely to be dragged into HMRC’s net in the future.
The government took £0.7 billion in inheritance tax (IHT) in April as frozen thresholds continue to see families dragged into HMRC’s net.
Inheritance tax receipts last month were £65 million lower than the same period in 2025, however experts believe this to be a blip.
The IHT nil-rate band has been frozen at £325,000 until 2031, with rises in house prices and other assets, as well as pensions being included within people’s estates from April 2027, likely to see more families liable for the dreaded ‘death tax’.
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Adam Craggs, partner and head of tax, investigations and financial crime at law firm Reynolds Porter Chamberlain, said: “IHT is increasingly functioning as a tax on property inflation rather than purely inherited wealth. IHT thresholds have remained frozen while house prices, particularly in London, have increased over the same period.
“The debate is therefore no longer just about the 'fairness' of IHT at death. It is increasingly becoming a proxy argument about housing, intergenerational inequality, regional imbalance, and whether the UK's economic model has become overly dependent on the appreciation of property wealth in London and the South East."
How is inheritance tax changing?
IHT reliefs came under attack in the 2024 Budget.
Pensions will be part of an estate for IHT calculations from April 2027, while business relief, agricultural relief and the alternative investment market now face new restrictions.
Agricultural and business property reliefs for IHT have been capped, but in December, the government rowed back on the plans hitting business owners and farmers, announcing it would increase the 100% agricultural and business property relief threshold to £2.5 million, up from its previous policy of £1 million, from April 2026. There is also the ability to transfer this threshold on first death to a surviving spouse or civil partner.
There were concerns that the chancellor would go further in her 2025 Budget with a clampdown on gifting rules which didn’t materialise.
Simon Martin, head of UK technical services at Utmost, a wealth firm, said: “We may see behavioural shifts in the housing market as a result of the ‘mansion tax’ set to come into force from April 2028, which could yet temper the pace of future inheritance tax receipts growth.
“All eyes now turn to the impact of including pension death benefits in an individual’s estate for inheritance tax purposes from April 2027 onwards which will necessitate a major strategy shift in how families approach estate planning.”
We reveal how to navigate the inheritance tax paperwork maze in nine clear steps in another article.
How to cut your inheritance tax bill
You can only plan based on the current tax system and some allowances remain.
Assets can be inherited by a spouse tax-free and leaving money to charity can also reduce your IHT liability.
Giving money or assets away as gifts can reduce the value of your estate, with no IHT payable if you live for seven years after the transfer – known as the seven year rule. IHT is owed on a sliding scale for transfers made within this seven year limit.
Investing in unlisted companies that qualify for business property relief is still typically inheritance tax free after two years but since 6 April 2026 you have an overall £2.5 million Business Relief Allowance. Anything in addition will be taxed at half the normal rate or 20%.
Additionally, investing in an alternative investment market ISA, although risky, is currently IHT-free after two years, but since 6 April 2026 there has been a rate of 20%.
