Inheritance tax receipts continue to rise, with the latest official data from HMRC showing £1.5 billion was taken from estates in May 2025.
The figure is up seven per cent annually (£98 million compared to the same period last year) as more families get caught out by frozen tax thresholds and the rising value of assets.
Analysts warn that inheritance tax receipts are only likely to increase further amid changes to IHT from 2027 when pensions will be included in the value of an estate and business and agricultural reliefs will be restricted.
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Rachael Griffin, tax and financial planning expert at Quilter, said: “With property values still high and nil-rate bands frozen until 2030, more estates are slipping into the IHT net, often without any deliberate wealth accumulation. Families can be caught off guard, particularly where no planning has been done in advance."
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There may be some respite for former non-doms though as chancellor Rachel Reeves is rumoured to be considering reversing plans to charge IHT on overseas assets after a set period.
Nicholas Hyett, investment manager at Wealth Club, said: "This was a decision that was originally expected to earn HMRC an additional £430 million a year.
“However, the potential U-turn is no doubt down to the exodus of wealthy non-doms over the last six months or so. Not only does that mean the tax will raise less than hoped, but the UK also loses all the other benefits these wealthy residents bring – including spending, investment and philanthropy.
"The UK has a lot of appeal – but not enough to give up 40% of your families wealth. It’s a shame the government will only listen once the numbers start to do the talking.”
There are steps you can make to reduce your IHT bill without waiting for the government to make changes though.
How to cut your inheritance tax bill
There is normally no inheritance tax to pay if the value of the estate if below £325,000, and there are ways to increase this threshold. For instance, you could give up to £500,000 free from inheritance tax by giving your home to your children or grandchildren, if your estate isworth less than £2 million.
Sharing tax allowances with a spouse can help reduce your bill, especially as married couples can pass assets to each other tax-free.
Griffin suggests putting assets such as property or savings in trusts can also be a good way of getting money out of your estate while still having a degree of control over how it is spent depending on the type of trust. Although there are costs associated with this.
Another option is gifting.
Ian Dyall, head of estate planning at Evelyn Partners, said: “Making regular gifts using the ‘normal expenditure out of surplus income’ exemption is one popular option, as is exploring longer-term gifting plan, such as starting the ‘seven-year clock’ ticking on larger gifts.
“How long clients can take advantage of these options remains to be seen. The government may choose to overhaul the gifting regime at some point, potentially extending the seven-year rule to 10 years – a move that would create an extra hurdle for those wanting to pass on wealth in a tax-efficient way.”
