The latest HMRC data on tax receipts has prompted reaction from across the industry, with commentary spanning inheritance tax, income tax and capital gains tax as households continue to face pressure from frozen thresholds and shifting tax policy.
Industry experts say the figures underline the growing impact of fiscal drag and rising asset values, with more individuals being drawn into higher tax bands and increasing numbers of estates becoming exposed to inheritance tax liabilities. They also point to continued uncertainty around capital gains tax behaviour and ongoing pressure on household incomes as key themes shaping tax planning decisions.
Shaun Moore, tax and financial planning expert at Quilter comments:
Inheritance Tax receipts drop again
“Inheritance Tax receipts for May are £1.4 billion, which is £37 million lower than the same period last year, marking another month of lower receipts compared to last year’s record total.
While monthly figures can fluctuate, the broader direction remains clear, with more estates being drawn into scope as thresholds remain frozen and asset values persist.
Following Andy Burnham’s just announced victory in the Makerfield by-election, the wider debate around wealth taxation is likely to move further into focus. Burnham has previously argued for scrapping Inheritance Tax in its current form and replacing it with a broader levy on wealth or estates, often linked to funding social care.
However, he has also indicated that any near-term policy would remain within Labour’s existing manifesto commitments and fiscal framework. That suggests more radical reform remains a longer-term prospect, likely tied to a future general election rather than imminent change.
In the meantime, the direction of travel is already established. Frozen thresholds and the inclusion of pensions from 2027 point towards steadily rising liabilities, placing greater emphasis on early and proactive estate planning.
We are also now firmly in the final year where pension wealth remains outside the scope of Inheritance Tax, with unused pension pots due to be brought within the taxable estate from April 2027. That will significantly increase the number of families facing a liability.”
Income tax and NICs continue to drive receipts higher
“PAYE income tax and National Insurance contributions for May stand at £92.2 billion, which is £7.5 billion higher than the same period last year, continuing the trend seen through the previous tax year.
This reflects the sustained impact of frozen income tax thresholds. Fiscal drag is now a central feature of the system, steadily pulling more income into higher tax bands and increasing the overall tax take.
Even as earnings growth moderates in real terms, the tax take continues to rise. For many households, higher nominal pay is increasingly being offset by a rising tax bill, limiting any improvement in take-home income.
With thresholds frozen until 2031, more people will continue to move into higher and additional rate bands, reshaping the tax base over the remainder of the decade.”
Capital Gains Tax highlights sensitivity to behaviour
Capital Gains Tax receipts for May are £168 million, £64 million lower than May last year, again demonstrating how variable this revenue stream can be.
While monthly movements can be uneven, the broader trend reflects a much tighter regime following the reduction in the annual exempt amount and higher CGT rates on shares and other assets.
CGT is particularly sensitive to behaviour, with receipts often driven by the timing of disposals rather than underlying market performance alone.
Continued political discussion around aligning CGT more closely with income tax adds further uncertainty. Even the prospect of change can influence behaviour, potentially bringing activity forward or delaying it, which in turn makes receipts harder to predict.
For investors, this reinforces the importance of using tax wrappers and carefully managing the timing of disposals as the regime continues to evolve.”
Nick Henshaw, Head of Intermediaries Distribution at Wesleyan, said:
“Following last month’s surprise drop, this latest rise in IHT receipts is back in line with expectations. May’s receipts won’t account for the slight decline in average house prices recorded for June this week, but overall, values continue to rise across all asset classes, which will see more people paying a higher amount of inheritance tax.
With less than a year to go until pensions are liable for inheritance tax, many advisers are doing what they can to support clients in planning ahead. But detailed guidance is still lacking from HMRC at this point, leaving a lot of guesswork, making giving clear advice a challenge.
The inclusion of pensions will see swathes of people grappling with questions about inheritance tax, including those who have never needed to consider it before now. Advisers should focus on ensuring their clients are aware of all the options at their disposal, so that they are prepared to make informed decisions when the timing is right.”
Mark Jephcott, Senior Relationship Manager at Utmost, commented:
“Inheritance Tax continues to generate historically high tax revenues for the Treasury as frozen thresholds and rising asset values bring more families within scope of the tax. The nil-rate band has remained unchanged at £325,000 since 2009 despite property prices increasing by more than 75% over the same period.
The Autumn Budget 2025 maintained this freeze until 2031, and the scope of IHT continues to widen following reforms to business property relief that came into effect on 6 April 2026 and with unused pension pots due to be brought within the scope of inheritance tax from April 2027. As a result, the number of estates expected to be caught by IHT is forecast by the OBR to almost double by 2030.
While these measures are increasing tax receipts, it is making the UK a less competitive destination for entrepreneurs, investors and internationally mobile wealthy individuals, who make an outsized contribution to the tax take.”
Will Hale, CEO of Key Equity Release, said:
“Rising demand from clients for IHT and estate planning support is turning the spotlight on the need for holistic advice, which looks at all options to support objectives around tax-efficient retirement funding and intergenerational wealth transfer.
Despite a small dip in receipts from April 2026 to May 2026 compared to the same period last year, total IHT receipts remain on course to hit £14.5 billion by the 2030/31 tax year, compared with £8.5 billion in the last tax year so never has quality advice been more important.
Advisers looking to achieve good outcomes for clients should be taking into account all assets and liabilities that sit on the family balance sheet.
With over £3.8 trillion of unencumbered housing equity sitting with the over 65s, property wealth must play a major role in all planning strategies.
Advisers who are not qualified in or do not want to advise on later life lending can set up referral partnerships with trusted specialists to ensure clients have access to products such as modern lifetime mortgages, which can be used to facilitate gifts to family members, supplement retirement income or to fund capital purchases.”
Jason Tebb, President of OnTheMarket, comments:
“This announcement from Labour is a welcome step towards fixing a complex and often uncertain homebuying process. The focus on upfront information, earlier certainty and higher professional standards tackles many of the root causes of delays and fall-throughs.
Improving early access to high-quality property information has long been a priority for OnTheMarket, helping buyers make more informed and transparent decisions sooner while reducing time and costs.
We look forward to working with Government and industry to help deliver a more transparent, efficient and trusted property market.”
Andrew Zanelli, head of technical engagement at Aberdeen Adviser, said:
“Yet another increase in inheritance tax receipts underlines how fiscal drag continues to pull more families into the scope of IHT.
With the nil rate band frozen until 2031 and pensions set to be brought into the IHT net from next April, the upward trajectory in receipts is unlikely to slow any time soon. In fact, we expect the pace of growth to pick up further from April 2027 as these changes fully feed through.
We’re hearing that advisers are already seeing heightened demand for estate planning support as individuals look to understand the implications and take proactive steps. In this environment, tailored advice that considers personal circumstances and long-term legacy goals is increasingly important.
With the right planning in place, including the effective use of tools such as trusts, it is possible to manage IHT exposure while staying aligned to broader financial objectives. A clear view of total wealth, combined with structured professional guidance, will be key to navigating the evolving landscape.”
