Death a “key focus” for government tax reform as IHT hits record levels

The latest inheritance tax receipts for July 2025 hit record levels at £844m; and £3.1bn in the four months from the start of this financial year in April 2025 to July 2025 – £0.2bn higher than the same period last year. July 2025 was 14% higher than June 2025 (£738m) and 13% higher than July 2024 (£749m).

And there is little sign of any fall in the record revenues currently being collected said Rachael Griffin, tax and financial planning consultant at Quilter.

“With nil-rate bands frozen until 2030 and property values still elevated, more estates are being pulled into scope. And with pensions set to be included from April 2027, the IHT net is tightening further.”

IHT revenues are running about 6.9% ahead of the same period last year added Ian Dyall, head of estate planning at Evelyn Partners, who suggests the upcoming budget in the Autumn will be important for families.

“Monthly receipts data reliably shows how fiscal drag is bringing more wealth into the scope of IHT, but the numbers that really matter for wealthier households are those showing the overall state of the public finances, because that’s what prompted last year’s Budget overhaul of IHT rules, and it’s not unthinkable that the transfer of wealth will be on the table again at the next Budget.”

Indeed if media reports in recent weeks are to be believed, the Chancellor Rachel Reeves is considering a number of options to raise public finances. Changes to business and agricultural property reliefs which don’t come into force until next April, and the inclusion of unspent pension assets in estates in April 2027 means the Treasury can’t get its hands on that money until after those dates. So a cap on lifetime gifts has been mooted alongside changes to the current taper rate of between 8% and 32% applied to gifts between seven and three years before death. It is another example of the government “looking at death as key focus for boosting public finances moving forward” said Will Hale, CEO of Key Advice & Air.

But any tax changes must consider unintended consequences of behavioural change said Griffin.

“Such a cap would mark a fundamental shift in how families pass on wealth, potentially capturing not just strategic transfers but also routine support between generations. Tracking lifetime gifts would be administratively complex and could lead to unintended behavioural shifts, from premature asset transfers to increased use of trusts. Any reform must balance revenue goals with the vital role intergenerational support plays in the UK economy.”

But, adds Dyall, there could be a short term argument in favour of tackling gifting by releasing

“One issue with such a step is that gifting might be a plus for other tax revenues and the economy. The forthcoming IHT rule changes are leading people to gift business assets and to start accessing their pensions, to spend as well as give away, which should lead to increased income and other tax revenues in the short term. Funds gifted to younger people are more likely to be spent and fed back into the economy, and in a roundabout way boost VAT and stamp duty land tax for instance. Maybe Treasury officials are not too worried about the short term IHT receipts and more keen to get money moving out of tax-protected pensions?”

Concluding that although the idea has merit, it is not likely to be a vote winner…

“this is still not going to raise the sort of sums that the public purse looks like it needs, certainly not in the short or medium term, so one wonders whether another move on IHT would be worth all the negative headlines.”