Inheritance tax (IHT) receipts fell sharply in May, dropping to £650 million from £850 million in April, according to the latest figures. The £200 million decrease has prompted a wave of analysis and reaction from financial experts, who are closely watching what this shift might signal for future tax policy and estate planning trends.
Jonathan Halberda, specialist financial adviser at Wesleyan Financial Services, said: “Even with this month’s dip, the broader trend is clear – frozen thresholds are having a real impact on families and inheritance tax receipts are only likely to rise.
This is no longer just a tax for the very wealthy, as it was initially designed. More and more families are being drawn into the IHT net – simply as the value of assets, such as their homes, continue to climb. And with pensions set to come into IHT’s scope from 2027, the tax’s reach is going to extend further.
Taking just a moment to plan around IHT can really pay off. It helps reduces the chances of your loved ones being hit with a surprise tax bill and can help ensure your money is passed on in line with your wishes.
Some ways you might be able to manage IHT exposure include:
- Managed gift giving
“Giving gifts of money or assets to loved ones is one of the most straightforward ways to reduce your Inheritance Tax liability.
In general, every year you are allowed to give gifts of any value to a spouse or partner, or gifts of up to £3,000 to anyone else.
You can also make regular payments out of your income, which can help stop the value of your estate exceeding the £325,000 tax-free allowance.
But there are limits: gifts given less than seven years before you die can be taxed, depending on the value and your relationship to the recipient.”
- Try a trust
“Another way to reduce your Inheritance Tax liability is to put some of your assets in a trust, which means they technically don’t belong to you anymore, so they aren’t counted as part of your estate.
A trust is a legal arrangement where assets are held by a trustee or group of trustees for the benefit of someone else, but you can still control how, when and to whom the money is paid.”
- Plan for your partner
Married couples and civil partners enjoy certain Inheritance Tax exemptions.
You can leave your entire estate – including the family home – to your spouse or civil partner with no Inheritance Tax to pay, even if its value exceeds the £325,000 threshold.
But couples who are living together, no matter how long they have been in a relationship, don’t qualify for this exemption.
As a result, some couples inheritance planning may include getting married or forming a civil partnership.
- Where there’s a will…
“Having an up-to-date will is one of the most effective ways to ensure your estate is distributed according to your wishes.
Without a will, you have no say over who inherits what or how much Inheritance Tax may have to be paid.
By making a will, and reviewing it regularly, you can take advantage of all the exemptions and allowances that can help you keep your Inheritance Tax bill as low as possible.”
Andrea Jones, Partner and National Head of Irwin Mitchell’s Private Client Advisory team, said:.
“These latest statistics show Inheritance Tax doesn’t just impact the very wealthy, it has become a mainstream tax burden affecting tens of thousands of families each year.
Our own analysis shows that as result of frozen thresholds, rising asset values, and policy changes – not increased personal wealth – nearly 40,000 estates could be liable for IHT by the end of 2026/27.
For many families, the value of the family home alone is enough to trigger a significant tax bill. That’s why early estate planning is no longer a choice — it’s a necessity.”
Laura Hayward, tax partner at professional services group S&W comments:
“The Treasury will be pleased to notch up another year-on-year increase in inheritance tax receipts given the pressure it is facing to plug the gap in public finances. There is much to suggest this trend of rising tax bills will continue for some time given policy announcements made at the last Budget and frozen allowances.
Changes announced in October to business and agricultural property relief, which are effective from April 2026, will make it more costly for many families to pass businesses on to the next generation. This has left some owners of family businesses extremely worried about whether they will be able to pay inheritance tax bills and may need to sell long standing businesses.
In addition, from April 2027, pensions will be brought into scope for inheritance tax purposes. If this pushes estates above £2 million, it could take someone from having a low inheritance 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 inheritance tax on their pensions while also losing some or all their residence nil rate band.
Even without these upcoming inheritance tax changes the fact that the nil rate band is set to remain frozen until at least 2030 means that more are being brought into scope for inheritance tax due to increases in asset prices in recent years.
The recent Spending Review, which committed significant investment to numerous government departments and projects, has fuelled speculation that the Chancellor will need to raise taxes at the Autumn Budget. Many families we are speaking to are on edge that further unfavourable changes could be made to the charging of inheritance tax. For example, some worry there is potential for the seven-year gifting rule to be scrapped or lengthened.
We are urging families to take a look at their tax planning position before any further possible changes are announced. Many are choosing to make effective gifts to family members or invest tax-efficiently to help reduce or eliminate inheritance tax bills. Gifts you make to other individuals are generally not subject to inheritance tax 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 inheritance tax even if you do die within seven years. To ensure that gifts are used in a responsible way, families often consider setting up trusts which provide an effective tool for tax efficiently passing on assets to the next generation in a controlled way.”
Simon Martin, Head of UK Technical Services at Utmost Wealth Solutions, a leading provider of insurance-based wealth solutions, commented:
On Inheritance Tax statistics
“Inheritance Tax is becoming an increasing revenue stream for the Treasury, with frozen thresholds and rising property values pulling more estates into the tax net each year. These fiscal trends will accelerate further over the coming years following the measures announced at the 2024 Autumn Budget, which tightened certain asset and wealth exemptions as well as extending the threshold freeze.
It is still too early to assess how the changes from the 2024 Autumn Budget are materially impacting tax receipts, but forecasts already point to a sharp increase in IHT revenues. Media rumours this week suggest the Treasury may be reconsidering its extension of IHT to non-doms’ worldwide assets, which also suggests that the broader impact of these reforms may still be in flux amid widely reported outflows of wealth from the UK.
The reforms will continue to drive a significant increase in demand for financial planning, as families look to understand how the new regime could affect them and how best to adapt their intergenerational wealth strategies.”
On Capital Gains Tax statistics:
Capital Gains Tax receipts declined last year by more than £1 billion while the OBR had to downgrade its estimated tax take at the Spring Budget primarily caused by declines in the value of financial assets. We also saw wealth outflows and behavioural changes both ahead of and following the revenue-raising 2024 Autumn Budget casting doubt over how successful the reforms will be.
Nonetheless, asset price inflation and the increases to CGT rates should still mean that receipts return to growth this year and the tax take is predicted to nearly double to over £25 billion by the end of the decade. Following the recent Spending Review, rumours are likely to swirl that further reforms to the CGT regime could be on the way given the Government’s pledge not to increase Income Tax, VAT or National Insurance for workers.”
Paul Barham, Partner at Forvis Mazars commented: “The latest figures from HMRC show that – like clockwork – IHT receipts continue to tick-up, with £98 million more collected than for the the same month last year. 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.”
Andrew Tully, Technical Services Director at Nucleus said:
‘IHT receipts have increased more than 50% over the past five years with the OBR suggesting significant increases will continue over the next few years. That upward trend is continuing in the 2025/26 tax year. Receipts will increase further in the years to come due to recent policy changes including limits to agricultural and business reliefs and extending the freeze in IHT nil-rate bands to 2029/30, as well as ongoing increases to property prices across the UK. If the Government’s proposals to include pensions within the estate for IHT purposes from April 2027 are introduced that will drive further strong growth.
These changes are 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.”
Harry Bell, Director of Financial Planning at Charles Stanley, comments: “The financial year opened with record IHT receipts and today’s figures show this trend is unlikely to change anytime soon.
Frozen thresholds are quietly bringing more families into higher tax rates each year, and with changes coming to Business Relief and Agricultural Property Relief in 2026, this will put even more pressure on an increasing proportion of families and businesses. The IFS predicts that by 2029–30 the share of deaths liable for inheritance tax will reach its highest level in over 50 years.* Adding even more coal to the fire, pensions will also be included within estates from 2027, generating billions in extra revenue. Historically this tax has made up a small proportion of the total tax haul, but perceptions of IHT being a preserve of the wealthy are set to change.
IHT is hugely complex, and with rumours of further legislative changes come Autumn, this could make it even more challenging in knowing what to do. In fact, our research found that 48% of consumers have no idea how much IHT will be payable on their estate if they were to pass away. Coupled with various changes still yet to come into effect, it’s crucial that individuals seek professional advice for their estate planning.”
Ian Dyall, Head of Estate Planning at wealth management firm Evelyn Partners, comments:
“May’s Inheritance Tax receipts data came in as expected, continuing the predictable annual rise that has become the norm in recent times. The steady annual rise in IHT receipts has almost become ingrained as inflation drags more assets and more estates across the frozen nil-rate bands.
IHT receipts are expected to continue rising as the Government moves ahead with its plan to reduce available reliefs by capping Business Relief and Agricultural Property Relief. Unspent assets in Defined Contribution pensions are set to fall within the scope of the death tax in April 2027, a change already creating a planning headache for those looking to pass on wealth to their loved ones.
One way to mitigate IHT is through lifetime gifting, something clients are increasingly approaching us about in a bid to protect their beneficiaries from tax. Making regular gifts using the ‘normal expenditure out of surplus income’ exemption is one popular option, as is exploring longer-term gifting plan, such as starting the ‘seven-year clock’ ticking on larger gifts.
How long clients can take advantage of these options remains to be seen. The Government may choose to overhaul the gifting regime at some point, potentially extending the seven-year rule to 10 years – a move that would create an extra hurdle for those wanting to pass on wealth in a tax-efficient way.”
Stephen Lowe, Director at retirement specialist Just Group, said: “The Treasury’s IHT revenues continue to surge with this tax train showing absolutely no signs of running out of steam through the first couple of months in this financial year.
Over the past four years, rising asset prices and frozen thresholds have combined in a pincer movement to drive consecutive record annual totals. The reforms announced at the Autumn Budget 2024, which included further extending the threshold freeze and tightening the exemptions for pension wealth, will likely tip more estates into paying the tax and further boost the Chancellor’s coffers.
Anyone who is uncertain or concerned that their estate may be subject to Inheritance Tax should get an up-to-date valuation of their estate, including a recent assessment of their property wealth. Estate planning is complex and difficult – especially with tinkering to the rules – and many families who wish to manage their estate efficiently will benefit from professional financial advice.”
