Inheritance tax receipts hit record high in 2025/26 to £8.5 billion
Inheritance tax receipts have hit a new annual high in 2025/26, as more families fall into the death tax trap. How can you avoid leaving your family with a large tax bill?
Inheritance tax (IHT) receipts hit a record high in 2025/26 as families parted with £8.5 billion – and more estates are set to be dragged into paying the so-called “death tax”.
Latest figures from HMRC show IHT receipts collected between April 2025 and March 2026 were 3.6% higher than the 2024/25 tax year (£8.2 billion).
Annual IHT receipts have surged since 2006/07, when the taxman collected £3.5 billion from loved ones, and further since 2022/23, after the government froze IHT thresholds and as assets rose in value.
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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 business owners and farmers did receive an early Christmas present in December, with the announcement by the government it would increase the 100% agricultural and business property relief threshold to £2.5m, up from its previous policy of £1 million, from April 2026. This has been combined with 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%.
