Industry reaction: Inheritance tax receipts rise to £7.1 billion in ten months

Inheritance tax (IHT) receipts reached £7.1 billion in the first ten months of the 2025/26 tax year, according to HM Revenue & Customs (HMRC) data released this morning. That is £100 million higher than the same period last year and continues a long-term upward trend in death tax takings.

The Office for Budget Responsibility forecast that IHT will raise £9.1 billion in the current tax year. Combined with measures confirmed in recent Budgets and legislation, this suggests the government remains on track to meet that target with two months still to go.

But rising receipts come amid intensified enforcement and public criticism that the inheritance tax system is unfairly affecting the middle class – a group historically seen as outside the reach of death duties. 

Experts are reacting below:

Isaac Stell, Investment Manager at Wealth Club, said: 

“The government has made a pig’s ear of inheritance tax reform. Crackdowns on farmers and business owners proved unpopular and ultimately unworkable, forcing a partial retreat on relief thresholds. But years of frozen allowances, combined with new rules that will bring pensions into the scope of IHT, mean more ordinary families, not just the wealthy, are being pulled into the tax net.

At the same time, HMRC’s tougher enforcement is adding further pressure at what is already a difficult time for bereaved families. With the tax base widening and sharp ‘cliff edges’ in the relief system still in place, proactive planning and accurate reporting have never been more important.

Recent reporting also highlights growing public frustration that inheritance tax is increasingly affecting middle income households, particularly those whose main wealth is tied up in their home or retirement savings. Frozen thresholds, set against steadily rising asset values, mean many people who would not consider themselves wealthy are now facing significant tax bills.

Meanwhile, HMRC investigations are increasing. More than 14,000 bereaved families have been investigated for potentially underpaid inheritance tax since 2022–23, with the number of cases this year running well ahead of last year. These inquiries which are often prompted by data matching and valuation checks can last months or even years, and may result in additional tax, interest and penalties.

Taken together, rising asset values, static allowances and expanded reporting requirements are creating a situation where estates that previously fell outside the IHT net are now becoming liable, leaving many middle-class families caught off guard.

Key policy points now in place or confirmed:

• Frozen nil-rate bands: The lifetime nil-rate band of £325,000 and the residence nil-rate band of £175,000 remain frozen. With property price inflation far outpacing these static thresholds, more estates including those of so-called “ordinary” homeowners are being dragged into IHT liability. 
• Pension inclusion from April 2027: Most unused private pensions will be counted as part of an individual’s taxable estate, a major expansion of what is subject to IHT. Executors will be required to report and pay any tax due on pension assets. 
• Business and agricultural relief reforms: From April 2026, BPR/APR qualifying assets are exempt from IHT up to £2.5 million; any excess over that will be taxed at an effective 20% rate. 

What can families and investors do to mitigate their inheritance tax exposure?

Despite tighter rules and increased enforcement, tax-efficient estate planning remains possible, though it now demands earlier, more detailed planning:

• Gifting early and carefully: Gifts from surplus income are immediately exempt; larger gifts fall outside the estate if the donor survives for at least seven years, but risk losing control of those assets.
• Business Property Relief (BPR) and qualifying investments: Planning around the £2.5 million full relief allowance and understanding effective tax rates on excess assets is critical.
• AIM ISAs and other relief-eligible holdings: While traditional ISAs still form part of the estate for IHT purposes, investing through vehicles that may qualify for relief requires professional risk assessment.
• Revisiting pension strategies: With pension IHT changes looming, serious consideration of how death benefits are held and passed on has become imperative.”

Andrew Tully, Technical Services Director at Nucleus said: 

‘IHT receipts have grown by more than 50% over the last five years, a trend that is predicted to continue and accelerate. This is due to the freezing of nil rate bands until April 2031, rising UK property values, and planned reductions to agricultural and business reliefs from April 2026. Although the impact of the agricultural and business relief changes has recently been eased with the increase in the 100% relief threshold to £2.5m, rather than the previously announced £1m.

The Government is also proceeding with its plans to include pensions within IHT from 6 April 2027. This will deliver poor outcomes for customers, beneficiaries, personal representatives, the industry, and HMRC. But it will drive further strong growth in IHT receipts after 2027.

There is still time for the Government to consider alternative options which increase its tax take on wealthier people passing on pension wealth, while avoiding the numerous problems created by bringing pensions into IHT. However, it’s looking increasingly likely it will stubbornly stick with its current complex proposals. 

Taken together all of this is likely to make IHT a more relevant issue for many more families within the next five years.  Advisers can help clients mitigate these taxes by setting up trusts and making use of gift allowances and the spousal exemption.”

David Cooper, director at retirement specialist Just Group, commented:

“Inheritance Tax is an important and growing source of tax revenue for the Treasury and looks set to creep past last year’s total and notch up a fifth consecutive annual high.

“The combination of frozen thresholds and rising asset prices combined has both widened the tax base and increased total receipts. The new policies announced at the Autumn Budget 2024 will only build on this momentum over the coming years.

“An increasing number of estates will tip over the thresholds, and the inclusion of pension wealth could see Inheritance Tax becoming a consideration for more people. The OBR estimates that around one in ten estates will be liable by 2030-31.

“Anybody 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.”

Samantha Warner, Legal Director at Winckworth Sherwood, said: 

“IHT revenues continue to steadily rise due to the prolonged freeze on IHT thresholds. The nil-rate band (NRB) and the residence nil-rate band (RNRB) have not been adjusted for inflation or rising property values, which means more estates are becoming liable for the tax as asset values increase. It remains a persistent and unavoidable inheritance tax planning issue, and one that should not be ignored. To avoid unexpected financial burdens, it is crucial for individuals to regularly review their wills and estate planning, with professional legal advice, to manage their wealth efficiently.”

Will Hale, CEO of Key Advice & Air said:

“The year-on-year growth in IHT receipts may have slowed, with receipts for April 25 to Jan 26 £0.1 billion higher than the same period last year. However, the direction of travel remains clear. Increasing the tax take on people’s wealth at death continues to be viewed by this government as a key strategy as they seek to address the pressures facing public finances.  

More people than ever before need quality advice around efficient intergenerational wealth transfer. And, with over £3.7 trillion in property equity in the hands of the over 55s, it is vital that the home is considered within the financial planning process.

Air’s recent white paper ‘The Home Belongs in the Plan’ (https://homeintheplan.airlaterlife.co.uk/) shows advisers how traditional strategies need to be reviewed in light of the changes to the tax environment and Consumer Duty obligations. Furthermore, if products such as modern lifetime mortgages are not included in an intermediary’s scope of advice, referrals to trusted specialists must be considered in order to ensure good outcomes are delivered.

Whether due to the tax environment or other socio-economic drivers, later life lending is rapidly moving from niche to norm and this is an opportunity that needs to be embraced by all advisers – whether that be mainstream mortgage brokers, IFAs, wealth managers and even accountants and solicitors.”  

Mike Winstanley, Director of Wealth Management at Bentley Reid, has said:

“The latest HMRC figures show IHT receipts continuing their upward trajectory. We have now seen consecutive record-level years for IHT, and the direction of travel is clear.

“In practice, this is being driven by a prolonged freeze in the nil-rate band and residence nil-rate band, combined with sustained growth in property values and investment portfolios over the past decade. As a result, more families who would not traditionally have considered themselves exposed to IHT are now firmly within scope.

“For clients, the impact is increasingly material. IHT at 40% is not marginal, it meaningfully alters the intergenerational transfer of wealth. Where an estate sits at £3–5 million, the tax liability can comfortably exceed £1 million without structured planning in place.

“The key shift we are seeing is that inheritance tax planning is moving from being a late-stage exercise to something that must be integrated into the wider financial plan earlier.

“That includes lifetime gifting strategies, appropriate use of trusts, business relief planning where suitable, or sometimes putting in place a straightforward life insurance policy first. Having protection in place can create breathing room and allow the wider planning conversations to happen properly, safe in the knowledge that liquidity is covered.

“The families who address this early, even in part, retain control and optionality. Those who leave it too late often find their choices limited.”

Amit Joshi, Managing Director of Wealth at Mattioli Woods, said: 

“Inheritance Tax revenues continue to climb as frozen thresholds pull more families into the tax net. Rising property values and inflation are quietly turning what was once a tax for the wealthy into a bill for ordinary households. Estates that would have paid nothing a decade ago are now automatically liable, without a single announcement.

“What is most concerning isn’t the tax itself, but the lack of awareness. Families often only realise the impact when it’s too late to act. Inheritance Tax has become a planning issue by stealth, and the cost of inaction is measured in lost choices, rushed decisions, and unnecessary tax.

Regularly reviewing wills and estate plans, and seeking professional financial advice, is no longer optional. It’s essential to protect family outcomes, preserve control, and ensure hard-earned wealth goes where it was intended, not where it happens to land.”