Annual Inheritance Tax liability statistics from HM Revenue and Customs today revealed that in the tax year 2022 to 2023:
- 4.62% of UK deaths resulted in an Inheritance Tax (IHT) charge, increasing by 0.23 percentage points since the tax year 2021 to 2022.
- The total number of UK deaths that resulted in an IHT charge has also increased. In the tax year 2022 to 2023, there were 31,500 taxpaying IHT estates, an increase of 3,700 (13%) since the previous tax year, 2021 to 2022.
- IHT tax liabilities created in respect of the tax year 2022 to 2023 were £6.70 billion. This was a rise of £0.71bn (12%) compared to the previous year.
Based on the figures being released, industry experts and professionals share their views.
Ian Dyall, head of estate planning at leading UK wealth management firm Evelyn Partners, comments:
“This data really just confirms what we already know: that more families are incurring inheritance tax liabilities, and more assets in each estate are becoming subject to tax – even before the IHT measures announced at the last Budget take effect. As asset prices, especially equities and property, continue to rise the frozen nil-rate bands offer less and less protection against IHT and families that take no steps to mitigate their liabilities will either get drawn into the scope of IHT or have the tax levied on a greater proportion of their assets.
The OBR forecasts total IHT liabilities for 2024/25 to rise 11.6% on the previous year to £8.4 billion, while receipts data shows HMRC has so far taken £8.2billion for that period.[1] The OBR also forecasts that in the current 2025/26 tax year IHT will raise £9.1 billion.
What these lagged annual liability figures do give us is some granular detail on how IHT is distributed and what reliefs are being used. First, while many more households are being drawn into the IHT net, it remains the case that the bulk of liabilities tend to be fairly concentrated among a small number of large estates. About 6,400 families with net wealth greater than £1.5million paid £4.3billion in IHT – or 64% of the total.
Families with that level of wealth tend not to garner much sympathy but the Treasury cannot sustainably prop up the public finances by taxing the wealthiest 1 or 2 per cent forever without consequence. The danger with seeking further taxation of wealth at the next Budget – whether that is via capital gains tax, inheritance tax or some other mechanism – is that such households, which are often wealth and business creators in themselves and quite mobile, could get fed up and leave the country.
As they are responsible for a good chunk of overall tax revenues in the UK that would be counter-productive.
Alternatively, they will change their behaviour in such a way as minimise tax liabilities. It’s likely that, as IHT at 40% deplete the estates of wealthy families more significantly year by year, more of them will take advice and seek ways of sidestepping the tax, such as shrinking their estates through lifetime gifting. Which is why the gifting regime could be in the sights of the Treasury for further reform.”
At her Autumn Budget last year, Chancellor Rachel Reeves announced that defined contribution pension pots will be included in estates’ inheritance tax liabilities from April 2027, and she also froze the nil rate bands for an extra two years, until April 2030.
She additionally reduced business and agricultural property relief from April 2026. The first £1mn of combined business and agricultural assets can still be passed on tax-free, but IHT will be levied at 20 per cent on the rest. A 20 per cent rate will also apply to AIM shares.
After these two IHT reforms have kicked in, annual receipts are forecast to rise to £14.3 billion in 2029-30, with around £2.5 billion of the rise in the intervening years due to the policies announced in October 2024.
Dyall continues: “Second, today’s figures confirm that after the spousal exemption (valued at nearly £6billion), the greatest protection against IHT was taken through business and agricultural property reliefs – a point that had obviously not gone unnoticed by Labour policy strategists in recent years. The combined value of agricultural and business property relief (APR, BPR) was £5.28 billion in the tax year 2022 to 2023, a rise of £0.86 billion on the tax year 2021 to 2022.
‘APR and BPR were introduced to help ensure the continuity of family businesses on the death of owner-managers. While some use of these reliefs might have been opportunistic, we won’t know how many farms and family businesses the crackdown will affect for several years, as the reliefs will be diluted from next April, but obviously the policy will play out among businesses for many years, unless reversed by a future government.”
Stephen Lowe, director at retirement specialist Just Group, commented: “The proportion of deaths liable to Inheritance Tax continues to creep ever upwards feeding on the ongoing freeze to thresholds and rising asset values.
Reforms announced at the Autumn Budget 2024 are expected to significantly accelerate both the number and proportion of deaths that trigger IHT charges. It is estimated that around one in 10 deaths (9.5%) will be subject to Inheritance Tax by the end of the decade (2029/30) as these fiscal reforms kick in and pull ever more people into the thresholds.
The removal of the pensions exemption from IHT will be the biggest driver of this increase with the OBR projecting that, from April 2027, this change will bring 31,200 more estates into scope of IHT before the end of 2029/30.
A good first step for anyone who thinks their estate may be subject to Inheritance Tax, is to get an up-to-date valuation. This should include a recent assessment of their property wealth and it will also now be important to consider how any pension wealth could be taxed upon death.
Kieran Bowe, partner in the Private Client team at law firm Russell-Cooke, LLP:
“Overall, IHT there has been an upward trajectory of IHT receipts over the past few years reaching new highs in the Summer of 2025.
According to the OBR, it expects IHT receipts to hit £9.1 bn in 2025-26 and it projects the amount will reach £14.3bn in 2029-30.
Since the freezing of the Nil Rate Band in 2009-10 at £325,000 HMRC’s IHT Revenue has surged increasing by almost 250% in 2024-25, whilst house prices have risen by approximately only 85% over the same period according to HM Land Registry.
The effect of the freezing of the Nil Rate Band for 15 years is many more families than ever before are being caught for IHT as wealth passes from one generation to the next.
We welcome HMRC’s long overdue proposals to digitise IHT as announced in the Autumn Budget (2024) however from April 2026 Business and Agricultural Property Relief will be capped at £1M and from April 2027 inherited unused pensions and death benefits will be within a deceased’s estate for IHT purposes.
Following a consultation process HRMC has provided welcome additional detail into the spread of APR and BPR claims. Around a third of estates currently qualifying for APR made claims of more than £1m. Under the new rules coming next year those estates would have faced significantly higher IHT bills, with today’s figures revealing the important role that APR, and BPR, plays in helping families protect and pass on their businesses to the next generation.
IHT paying estates are now also subject to an increase in the rates of interest charged by HMRC from 2.5% above base rate to 4% above base from April 2025, arguably penalising lower value taxable estates where the value of the family home represents most of the wealth inherited by descendants and loved ones.
The impact of these changes is many more families will be brought into scope for IHT than before the implementation of changes to the IHT regime as announced in the 2024 Autumn Budget .
Families who wish to limit their exposure to IHT will need to carefully plan succession of their wealth to their loved ones, simply transferring assets in their lifetime may not always be effective for IHT and in some cases can trigger a double whammy of IHT and CGT. It is more important than ever to seek professional advice.”
Richard Jameson, partner at Saffery LLP, comments:
“Today’s stats reveal that IHT liabilities rose to £6.7 billion in 2022–23 – a 12% increase on the previous year. This sharp rise reflects a perfect storm of frozen thresholds, rising asset values, and more wealth transfers following taxable deaths. Estates valued around £2.7m–£3m faced the highest average effective tax rate (AETR) in 2022–23. This suggests a tipping point where estates are too large to benefit from the Residence Nil Rate Band, which tapers away above £2m, but perhaps not large enough to take greater advantage of lifetime gifting, or reliefs such as Business Property Relief (BPR) and Agricultural Property Relief (APR).
Interestingly, the AETR fell slightly for estates above this band, likely reflecting the greater use of reliefs, exemptions and estate planning among ultra-wealthy households. This is in contrast to estates in the £2m–£7.5m range, where the average tax rate was a steep 24%.
Looking ahead, the effective IHT burden is set to shift significantly. It is unsurprising that IHT receipts are going up given the nil-rate band has been frozen since 2009. The removal of 100% APR and BPR above £1m from April 2026, and the inclusion of pensions within the IHT net from April 2027, will likely push more estates into the higher effective rates of IHT and trigger a bigger increase in tax take, particularly in the mid-to-upper wealth bands. These reforms could alter both the composition and volume of taxpaying estates across the full distribution. Plus, we will see a greater number of trust structures brought into the net as well, including those created by non-doms who have not left the UK.”
Pete Fairchild, National Head of Private Clients at Crowe, comments:
“The headline from today’s HMRC inheritance tax statistics is that there was a 12% increase in tax collected between the 2021/22 and 2022/23 tax years. This is unsurprising given the nil rate band has not increased for many years (in fact, it has been frozen at £325,000 to April 2030), creating fiscal drag, coupled with continuing rises in asset values.
The direction of travel of increasing revenue being collected via the most unpopular of taxes is clear. Once estates are affected by the value of pension pots being included (from April 2027) and the £1m cap on 100% agricultural and business property relief (from April 2026), more individuals will see a greater portion of their wealth being subjected to IHT.
These changes are affecting people’s behaviour. More individuals are reverting to seeing their pension pot as a vehicle to provide income in retirement, as opposed to an IHT planning opportunity. We are seeing more lifetime giving as people look to pass on their wealth and survive seven years to reduce their chargeable estate. Many clients have taken their 25% tax-free lump sum from their pension and gifted that immediately to their children.
The statistics reveal that £5.28 billion of combined APR and BPR was claimed in 2022/23, so we can expect quite a reduction in the quantum of relief being claimed in future years, with the knock-on effect of increasing IHT bills.
It remains to be seen whether the Chancellor will use the Autumn Budget to tinker with these proposals. We await with interest.”
Rebecca Williams, Divisional Lead of Financial Planning at Rathbones, says: “Death is becoming an increasingly costly business. The number of estates paying IHT rose by 13% in the 2022/23 tax year and is rapidly approaching the 2006/07 peak. It is on course to surpass that milestone before the end of the decade – even before factoring in the inclusion of pensions in IHT calculations from April 2027.
For ordinary families, simply inheriting a grandparent’s home – which they lived in all their lives and is now worth a tidy sum – can be enough to be on the hook for IHT bill.
Adding to the distress, families are often forced to navigate complex IHT rules while mourning the loss of a loved one. And grieving families will be dragged further into this web of complexity once pensions are brought into the IHT net from April 2027. It’s no surprise that the nation’s most hated tax is becoming even more despised.”
