Inheritance tax (IHT) contributed £7bn to the Treasury between April 2024 and January 2025, a rise of £700m on the corresponding period for the previous year.
The rise has been attributed to the ongoing freeze in IHT thresholds, coupled with rising property and asset values, and wider inflationary pressures.
Following last Autumn’s Budget, the Office for Budget Responsibility (OBR) predicted that approximately one in 10 deaths was likely to be liable for IHT by 2029-30, roughly double the figure for 2023-24.
One reason for the anticipated rise is the plan to include unused pension savings and some pension death benefits in the value of estates for IHT purposes. This is due to come into effect from 6 April 2027. Ian Dyall, head of estate planning at wealth management firm Evelyn Partners, said:
“Given the wide-ranging pressures on the public finances, with geo-political upheaval now prompting calls for greater defence spending, it might not be long before Rachel Reeves is again forced to seek new ways of boosting tax revenues.
“With the self-imposed limits on how she can do this, IHT remains one of the few ways the Chancellor can wriggle out of the fiscal strait-jacket.”
Shaun Moore, tax and financial planning expert at Quilter, added:
“This relentless rise in inheritance tax receipts is baked into government policy. Farmers and business owners are also feeling the pressure.
“A tax once aimed at the wealthiest estates is now creeping further into the middle class, and with unspent pensions set to be taxed from April 2027, the government’s IHT windfall is only set to grow.”
IHT receipts have risen as a share of UK GDP since 2009-10 in large part due to growth in asset prices (average house prices surged by more than 70 per cent between 2009 and 2022) and the IHT threshold remaining frozen at £325,000 since 2009.
