Inheritance tax receipts rise to £6.6 billion as more families pay up

With asset prices at or near all-time highs and tax thresholds frozen, more families are being pulled into paying inheritance tax

(Image credit: Peter Dazeley)

Inheritance tax (IHT) receipts jumped to a total of £6.6 billion through the first nine months of the current 2025/26 tax year, meaning more families are falling into the trap of giving away part of their inheritance to the taxman.

Official figures show an increase from April to December 2025 of £232 million in the amount of inheritance tax collected compared to the same period in the 2024/25 tax year, a rise of 4%.

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“In a changeable fiscal environment, anyone who is concerned that their estate may be subject to IHT should get an up-to-date valuation of their estate, including an assessment of their property wealth. A professional adviser can help people who want to manage their estate in an efficient way and ensure as much as possible can be passed on to loved ones.”

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 will face new restrictions.

Agricultural and business property reliefs for IHT will also be 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, combined with the ability to transfer this threshold on first death to a surviving spouse or civil partner, is expected to go some way to alleviating the concerns raised over this measure.

Nicholas Hyett, investment manager at Wealth Club, said: “All of these changes are sold as closing loopholes and targeting the wealthy without affecting ‘working people’, never mind that they have been damaging for small businesses, family farms and UK capital markets.”

There were concerns that the chancellor would go further in her 2025 Budget with a clampdown on gifting rules but this 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.”

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.

Investing in unlisted companies that qualify for business property relief is still typically inheritance tax free after two years but from 2026 you will have an overall £1 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 there will be a rate of 20% from 2026.

Jonathan Halberda, financial adviser at Wesleyan Financial Services, said: “January often brings fresh plans from everything to savings and investments to retirement – all of which can have a bearing on your wider IHT plans.

“We often see a flurry of big financial decisions in the new year – whether it’s passing on money early, adjusting retirement plans or rethinking investments – but these are moves that need careful thought, not urgency. We’ve seen the cost of panic planning before. A rushed gift or pension withdrawal can trigger unexpected tax bills and leave a lasting mark on someone’s long-term financial security.”

Marc Shoffman is an award-winning freelance journalist specialising in business, personal finance and property. His work has appeared in print and online publications ranging from FT Business to The Times, Mail on Sunday and the i newspaper. He also co-presents the In For A Penny financial planning podcast.

With contributions from

Laura Miller