Inheritance tax receipts continue to rise, highlighting the growing impact of fiscal drag and recent policy changes on UK families and business owners.
New figures from HM Revenue & Customs show that £6.6 billion was collected in inheritance tax during the first nine months of the 2025/26 tax year, £200 million more than the same period last year, keeping the government on track to meet the Office for Budget Responsibility’s £9.1 billion forecast for the full year.
With thresholds frozen, reliefs under pressure and pensions set to be brought more fully into the inheritance tax net, experts warn that more estates will be caught by the tax in the years ahead, increasing the importance of early and proactive estate planning.
Experts across the financial industry are reacting to the figures below:
Shaun Moore, tax and financial planning expert at Quilter:
HMRC’s latest tax receipts for December may look encouraging at first glance, but the headline figures flatter to deceive. While they offer the Treasury a positive way to close the calendar year, they increasingly reflect a tax system shaped by structural design choices rather than a genuine improvement in economic conditions or household finances.
Inheritance tax receipts reached £6.6bn in December, which is £0.2bn higher than the same period last year.
Although growth in IHT receipts can appear relatively modest month to month, the longer-term trend remains firmly upwards. With the nil-rate band frozen at £325,000, rising property values and accumulated savings are steadily pulling more estates into the tax net.
What was once viewed as a tax affecting a relatively small minority is increasingly becoming part of mainstream financial planning, including for families who would not traditionally consider themselves wealthy.
That pressure is set to intensify further in the years ahead, particularly with pensions due to be brought into scope for inheritance tax from 2027.
Ian Dyall, Head of Estate Planning at wealth management firm Evelyn Partners, says:
‘Such gradual increases in the Inheritance Tax take – driven by the fiscal drag effect of rising asset values taking more households’ estates above the frozen nil-rate bands – will be eclipsed in the coming few years by structural changes in IHT reliefs and rules.
‘For business owners looking at potential IHT liabilities and the long-term financial security of their firm and their family, a clear deadline for succession planning is fast approaching.
‘A new cap on agricultural property and business reliefs will come into force on 6 April that means many business owners and their families face a greater IHT bill at death, which in some cases could spell jeopardy for the firm itself. A sudden and unexpectedly large IHT bill, particularly where liquid assets are in short supply, could spell the end for even a successful enterprise and the jobs it provides.
‘Business owners and backers might be distracted by myriad pressures coming from tariff threats, business rates reform, National Insurance increases and minimum wage hikes – but they can still take steps now to mitigate some potentially damaging tax liabilities.
‘Transfers of assets that can be made today with no immediate tax charge will be limited after 6 April, and the use of trusts could play a key role, which means that action must be taken now to address some potentially complex IHT planning and legal issues.
‘We have seen data this month revealing a significant increase in the use of trusts, with the number registered in the 2024/25 tax year amounting to 14.5% of all existing trusts.[1] Some of this will be due to a deadline for the registration of some trusts, relating to anti-money laundering legislation.
‘But we are also seeing an increased interest in trusts among clients since the October 2024 Budget introduced not just these changes to APR/BR but also the inclusion of unspent pension assets from April 2027. As IHT nil-rate bands remain in a long-term freeze (until April 2031) and asset values increase, many more families are being drawn into IHT liabilities – a trend that will be swelled by the IHT reforms which take effect in the next 18 months.
‘That will require more households to seek professional advice if they want to effectively reduce their IHT liability, as best estate planning practice is often far from straightforward.’
Nicholas Hyett, Investment Manager at Wealth Club, said:
“The government has made a pig’s ear of inheritance tax reform. Crack downs on farmers and business owners have been unpopular, damaging, and ultimately unworkable.
The result was a 23rd December U-turn on the amount of inheritance tax relief that can be claimed through Agriculture Property Relief (APR) and Business Property Relief (BPR). That early Christmas present was a relief for farmers and small business owners, but don’t let it distract you from the wider picture. The government is still making a massive inheritance tax grab.
Prior to the climb down on APR and BPR, the annual IHT take was expected to go from £8.3 billion annually at the start of this parliament, to £14.5 billion by 2030/31. Most of that extra money will still turn up in HMRC’s coffers. It is being driven by frozen thresholds – which will see families who previously wouldn’t have been considered wealthy enough to face IHT fall within the taxman’s scope – but also changes to pension rules. Residual pensions used to be IHT free if you died before 75, not any more.
The combination of frozen thresholds and expanded scope mean the government’s share of inheritances will continue to increase for the rest of this decade and beyond. That won’t change until thresholds are unfrozen or the dogs’ dinner of policy mistakes and subsequent U-turn succeeds in making us all poorer.”
David Cooper, director at retirement specialist Just Group, commented:
“Inheritance Tax has been a powerful revenue generator for the Treasury following four consecutive years of record tax takes thanks to frozen thresholds and rising asset prices.
“While the tax is just about on track to clock up a fifth consecutive annual high and meet the OBR’s estimate, there are signs that the rate of increase has flattened this year. The Treasury will be banking on the policies announced at the Autumn Budget 2024 to provide fresh momentum to meet the 67% increase in revenue forecast over the next five years.
“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.”
Simon Martin, Head of UK Technical Services at Utmost, a leading provider of insurance-based wealth solutions, commented:
“Despite a slowdown in the rate of growth, Inheritance Tax receipts are on course for another record-breaking year underpinned by resilient property prices and asset inflation. However, 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 growth.
“The decision at Autumn Budget 2025 to maintain the freeze on nil-rate bands and allowances means that a growing number of estates will be drawn into the IHT net in the years ahead. When set against the structural changes announced a year earlier, Inheritance Tax is becoming an ever more dependable source of revenue for the Treasury.
“Business owners and farmers did receive an early Christmas present in December, with the announcement by the Government to increase the 100% Agricultural and Business Property Relief threshold to £2.5m. This, combined with the ability to transfer this threshold on first death to a surviving spouse or civil partner, will go some way to alleviating the concerns raised over this measure.
“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.”
Paul Barham, Partner at Forvis Mazars commented:
“The latest figures from HMRC show that – like clockwork – IHT receipts continue to tick-up, with £6.6 billion collected compared to £5.8 for the previous month. Frozen thresholds are bringing more and more estates within the web of the taxman and every month more families are finding the estates of their deceased relatives subject to the tax. While the Chancellor may soften the rules around IHT for non-doms, we also need to consider that pensions will be considered part of estates from 2027, tightening the screw even further for the ordinary Britons.
“Mitigating the tax is possible, but considered planning is required for this – especially given the rumours of further tweaks to IHT in the Autumn. Making use of allowances while you are able to is essential, as is knowing the rules around gifting”
Will Hale, CEO of Key and Air commented:
“These latest figures should not be a surprise to anyone and provide further evidence that the IHT receipts expected in 2025/26 are on course to be a record. Also, given the economic challenges the UK faces and the policies being pursued by this government, we can expect the raid on people’s wealth at death to continue to gather pace in the years ahead.
“Tax planning has always been a key component of financial advice and never has the need been greater than it is today. However, as is addressed in Air’s recent white paper ‘The Home Belongs in the Plan’ (https://homeintheplan.airlaterlife.co.uk/) traditional strategies need to be reviewed in light of the changes to the tax environment and Consumer Duty obligations.
“With over £3.7 trillion in property equity in the hands of the over 55s and products such as modern lifetime mortgages offering flexible ways to facilitate efficient intergenerational wealth transfer, advisers must equip themselves with more knowledge on this sector and be prepared to either expand their scope of advice or put in place referral relationships with trusted specialists in order to grasp this opportunity and ensure good outcomes for customers.”
Nick Henshaw, Head of Intermediary Distribution at Wesleyan Financial Services, said:
“We’re 15 months from the April 2027 pension changes – and that window is tighter than most clients realise. The advice firms acting now will deliver far better outcomes than those caught in the late-2026 rush.
“Rising IHT receipts will keep client anxiety high, but smart advisers will turn that concern into action. The conversations happening now – modelling drawdown scenarios, reviewing estate structures, quantifying the tax impact – are what separate proactive planning from panic decisions.
“As these conversations intensify, it’s worth considering specialist on-platform tools that can support more sophisticated strategies. For instance, smoothed funds can help manage sequencing risk and volatility drag for clients accelerating pension drawdown as part of their pre-2027 IHT planning – ensuring assets last as long as needed while minimising tax exposure.”
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