Inheritance tax receipts jump 11% even before Autumn Budget overhaul

HMRC started the tax year with an inheritance tax (IHT) receipt boost, official data shows.

The previous tax year was already a record high for IHT receipts and the intake rose to £5 billion – up 11% annually – between April and October 2024.

The taxman took an extra £500 million from estates during the period compared with last year and analysts expect the intake to rise further after chancellor Rachel Reeves used her first Autumn Budget to overhaul the system and ultimately increase IHT bills.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Increasing numbers of estates were already facing falling into the IHT trap due to higher house prices and fiscal drag due to frozen tax thresholds.

But Reeves is looking to raise more money from IHT receipts to fill gaps in public finances.

She announced in the Autumn Budget that the freeze on IHT thresholds at £325,000 would remain for a further two years until 2030.

Agricultural and business property relief are to be reformed, meaning that from April 2026, the first £1 million of qualifying combined assets will have no inheritance tax at all but anything above that will get 50% relief, with the rest taxed at 20%.

Additionally, alternative investment market (AIM) shares will no longer be fully exempt from IHT and will have a rate of 20% from April 2026 when part of an estate.

From April 2027, inherited pensions could also be subject to IHT.

“Inheritance tax was already an absolute cash cow for the government,” says Alex Davies, chief executive of Wealth Club.

“The extreme changes announced in last month’s Budget which badly affect farmers, business owners, pension policyholders and investors, mean these figures are only going to increase over the coming years.”

Rachael Griffin, tax and financial planning expert at Quilter, said the IHT figures are only likely to rise further after the Budget.

"This consistent upward trend underscores the government’s rationale for freezing the IHT threshold until 2030,” she says.

“Farmers are also likely to start to bolster these figures as agricultural property relief is made less generous. These changes mean more farmers may face higher IHT liabilities, potentially forcing difficult decisions about the future of family-owned farms. Similarly, the tightening of reliefs for AIM shares and business relief will also raise more for government coffers.”

How to reduce your IHT bill

Wealthy individuals will need to rethink their approach to IHT planning in the coming years, particularly as AIM shares and pensions will eventually no longer be exempt.

You could still invest in an AIM ISA, which will be IHT-free, as are other savings in the tax wrapper.

Currently, AIM shares outside an ISA would be IHT-free after two years but from April 2026 they will be taxed at a rate of 20%.

Other options to avoid IHT include giving money away early by making gifts to loved ones.

You can give unlimited amounts but typically these take seven years to be completely free of IHT.

Spouses can share allowances, so you can pass assets to a husband, wife or civil partner tax-free.

Griffin adds: “These various changes are likely to drive greater urgency in estate planning, as taxpayers seek to navigate a landscape where traditional reliefs and exemptions are gradually eroded and new financial plans need to be laid.”