Inheritance tax (IHT) receipts have soared to a record £8.2 billion in the 2024-25 tax year, marking a significant rise from £7.5 billion the previous year and more than double the amount collected a decade ago, according to new figures released by HM Revenue & Customs.
The steep rise in IHT revenues comes amid surging property and asset values and unchanged tax-free thresholds that have remained static for years, drawing an increasing number of estates into the tax net. Financial advisers warn the situation is likely to worsen as further tax changes loom.
The IHT nil-rate band has been frozen at £325,000 since 2009, and the additional residence nil-rate band of £175,000, introduced in 2017 for those passing on family homes to descendants, is also frozen. These thresholds are not due to change before 2030, despite inflation and rising asset values pushing many more estates above the taxable limit.
Real estate is now the largest component of most taxable estates, accounting for 38 per cent of total value, according to research by Savills. Stocks and shares make up 29 per cent, while cash holdings contribute around 18 per cent.
Only around 4 per cent of UK deaths currently result in an inheritance tax bill, but this number is expected to grow. The Office for Budget Responsibility predicts IHT receipts could climb to £13.9 billion annually by 2030.
Financial adviser Jonathan Halberda of Wesleyan Financial Services said the trend was predictable. “With frozen thresholds and rising house prices, many families who once wouldn’t have faced IHT are now finding themselves unexpectedly caught,” he said. “We’re seeing increasing complexity, with little public understanding of how estates may be affected.”
The rise in revenue is set to accelerate with forthcoming policy changes. From April 2026, the government will cap relief for agricultural and business property at £1 million. Any value above that will be taxed at 20 per cent—a move aimed at curbing tax avoidance by wealthy individuals investing in farmland.
Additionally, pension pots—currently exempt from IHT—will become taxable from 2027. Treasury estimates suggest the pension tax change could raise £1.46 billion a year by the early 2030s, and up to £6.2 billion annually by 2047.
These reforms have sparked concern in the financial and farming sectors. Farming groups warn the cap on agricultural relief may force the breakup of family-run farms, while advisers say taxing pensions introduces further complexity into an already intricate system.
“As more middle-income families are drawn into the IHT net, there’s growing pressure on the government to review a system that no longer reflects modern wealth or financial realities,” Halberda added.
