New data published today by HMRC shows that IHT receipts for April 2024 to March 2025 were £8.2 billion, which is £0.8 billion higher than the same period a year earlier.
Laura Hayward, tax partner at professional services group S&W comments:
“Given the uncertainty facing the UK economy, another year-on-year increase in IHT receipts will be welcomed by the Chancellor.
“Frozen allowances, inflationary growth of asset values and other factors has seen more and more families dragged into paying IHT in recent years. With upcoming changes already announced by the Chancellor in the October 2024 Budget, the trend of more families being brought into scope for IHT looks set to continue. We are having increased conversations with clients who want to know what they can do to mitigate against the IHT changes before they are introduced.
“The big change is that from April 2027, pensions fall into estates for IHT purposes. If this pushes estates above £2 million, it can take someone from having a low IHT tax exposure to a high one. This is because the taper for the residence nil rate band kicks in for estates over £2 million, which means taxpayers face the double whammy of IHT on their pensions while also losing some or all their residence nil rate band
“In addition, the Government has announced significant changes to IHT on assets qualifying for business and agricultural property relief. From April 2026, there is a £1 million lifetime allowance across business property relief and agricultural property relief for those assets qualifying for 100% relief (plus lifetime gifts from 30 October 2024 where the person giving the gift dies on or after 6 April 2026). The balance of qualifying assets will be eligible for 50% relief. AIM shares will qualify for relief at 50% rather than 100% when held for more than two years.
“Ahead of these upcoming changes to IHT, clients are increasingly asking how they can most effectively make gifts to family members or invest tax-efficiently to help reduce or eliminate IHT bills. Gifts you make to other individuals are generally not subject to IHT unless you die within seven years. There is also an annual gift allowance of up to £3,000 per tax year, and this will not be subject to IHT even if you do die within seven years. We know that many families want to ensure that gifts are used in a responsible way which can make setting up trusts an effective tool for tax efficiently passing on assets to the next generation in a controlled way.
“Given the state of the UK’s finances speculation is rife that the Chancellor will need to look again at increasing taxes at the Autumn 2025 Budget and could consider making further changes to IHT. Some worry there is potential for the seven-year gifting rule to be scrapped or lengthened. This backdrop of uncertainty provides added urgency for families to look at their tax planning position before any further possible changes are announced. This is a complex area so taking professional advice is one of the ways that can help families understand how to manage their money tax efficiently and help ensure they don’t pay more tax than they need to.”
the nil rate band remains frozen at £325,000 until at least 2030
