HM Revenue and Customs (HMRC) has reported that inheritance tax (IHT) receipts have reached £7 billion between April 2024 and January 2025, marking a £700 million increase compared to the same period last year. With two months remaining in the tax year, the government is on track to surpass the record-breaking £7.499 billion collected in 2023–24.
Financial experts attribute this surge to long-term trends, including rising property values and frozen tax thresholds. “Inheritance tax continues to be a meal ticket for HMRC. It may only affect a small percentage of estates, but that number is growing,” said Nicholas Hyett, Investment Manager at Wealth Club.
Increasing Number of Estates Affected
The Office for Budget Responsibility (OBR) projects that nearly 10% of estates will be liable for IHT by 2030. Factors contributing to this include the prolonged freeze on tax-free allowances and changes in tax reliefs. The main IHT threshold of £325,000 has remained unchanged since 2009 and is set to stay at that level until at least 2030. Similarly, the £175,000 residence nil-rate band, introduced in 2020, has not been adjusted for inflation.
These freezes, often described as “stealth taxes,” allow the government to increase tax revenue without directly raising tax rates. Combined with the phased reduction of reliefs on AIM-listed and private business assets, these changes have made estate planning increasingly complex.
Challenges and Strategies for Estate Planning
Experts warn that avoiding IHT is becoming more difficult, particularly for business owners and investors. “Reliefs are shrinking, while asset values are rising,” Hyett noted, emphasizing the need for strategic financial planning.
Despite the tightening regulations, opportunities for tax-efficient planning remain. One widely used strategy is lifetime gifting, particularly regular financial support given from surplus income. “Many grandparents use this approach to help with school or university fees,” Hyett added. “Avoiding double taxation through IHT is a nice added sweetener.”
As inheritance tax revenues continue to climb, financial advisors urge families to seek early guidance to protect their estates. With further changes to IHT rules expected, careful planning is becoming increasingly essential for those looking to manage their tax liabilities effectively.
