Inheritance Tax receipts for April 2024 to January 2025 are £7.0 billion, which is £0.7 billion higher than the same period last year, HM Revenue & Customs has revealed.
Ian Dyall, Head of Estate Planning at wealth management firm Evelyn Partners, said that the monthly increase in inheritance tax receipts leaves “little doubt” that this will be another record tax year for IHT revenues as estates across the UK continue to grow in value and nil-rate bands remain frozen. He added:
“This inflation-led boost to the Treasury coffers will already be accounted for in the fiscal forecasts. Unfortunately for the taxpayer, despite this fiscal drag and the measures at the Budget which will bring pensions into IHT from 2027 and squeeze business and farm assets harder, inheritances might not be out of the woods yet.
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.
Pension pots will not become liable to IHT until April 2027 and the combined business and agricultural property relief exemption will not be cut to £1m until April 2026. While it seems unlikely further tax changes will be announced at the spending review in late March, the next autumn Budget could well stir speculation if the Chancellor has to cast around for a few extra billion to balance the books.”
Tim Snaith, Partner at Winckworth Sherwood said that IHT revenues continue to steadily rise due to the prolonged freeze on IHT thresholds. He continued:
“The nil-rate band (NRB) and the residence nil-rate band (RNRB) have not been adjusted for inflation or rising property values, which means more estates are becoming liable for the tax as asset values increase. It remains a persistent and unavoidable inheritance tax planning issue, and one that should not be ignored. To avoid unexpected financial burdens, it is crucial for individuals to regularly review their wills and estate planning, with professional legal advice, to manage their wealth efficiently.”
Dyall said that one possibility is an overhaul of the gifting regime, as this would be a “relatively easy way” for the Treasury to “extract a bit more from IHT without raising the headline rate or cutting the nil-rate bands”. He continued:
“That could close off some of the options that families have been using to reduce their IHT liability, especially since the October Budget. We have seen many clients increase gifting since as far back as the election – some simply setting the seven-year clock ticking for potentially exempt transfers with large one-off gifts, others using lesser-known methods like gifts out of surplus income.
‘Either way, as the trend is most definitely that many estates will face significantly higher IHT bills, with possibly fewer ways to mitigate them, then the option of insuring against the liability is also growing in popularity. Since October we have already seen many more clients seeking whole of life cover aimed at covering a future IHT bill so their beneficiaries will not have to foot it, and we expect to see many more do this in the future as it is not yet a widely understood option – particularly among families who are not taking professional advice.”
Paul Barham, Partner at Forvis Mazars commented:
“The latest figures from HMRC show that it began the calendar year with a record IHT haul for January, with £7 billion collected which is £0.7 billion higher than the same period last year. While traditionally viewed as a tax reserved for the top 1%, frozen thresholds mean that every month more families are finding the estates of their deceased relatives subject to the tax. In fact, the IFS predicts that by 2029–30, the share of deaths liable for inheritance tax will reach its highest level in over 50 years.”
Shaun Moore, tax and financial planning expert at Quilter said that this “relentless rise” in inheritance tax receipts is “baked into government policy”. He said:
“With the nil-rate band (£325,000) and residence nil-rate band (£175,000) frozen until 2030, more and more families are being dragged into paying the tax. Rising house prices, particularly in the South East, mean many people that don’t consider themselves to be wealthy will now find themselves above the threshold and facing a 40% tax bill.
Farmers and business owners are also feeling the pressure. The upcoming reforms to Agricultural Property Relief and Business Relief could force more family farms and small enterprises into difficult decisions about their futures. 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.
Inheritance tax remains one of the most resented taxes in the UK, yet the government is changing policy so more people than ever will pay it. Without reform, families will continue to find themselves hit with unexpected tax bills on what they hoped to pass down.”
On Capital Gains Tax (CGT), he said:
“Capital Gains Tax receipts hit X in January, marking yet another increase as taxpayers adjust to the harsher tax environment. In the 12 months to January 2025, total CGT receipts have now reached £14.56 billion, similar to the £14.59 billion collected in the same period last year.
This trend is being driven by two major forces: the reduced Annual Exempt Amount (AEA) and the increase in CGT rates, which came into effect in October 2024. With the AEA now just £3,000, down from £12,300 two years ago, fewer gains escape tax, and more investors are finding themselves liable for CGT—even on relatively modest asset sales.
The rise in basic rate CGT from 10% to 18% and higher rate CGT from 20% to 24% has further squeezed those looking to cash in on investments. As a result, many investors have rushed to sell before the changes fully settle in, pushing receipts higher.
Further analysis shows that CGT receipts have increased by 271% over the past decade, from £3.91 billion in 2013-14 to £14.49 billion in 2023-24. This dramatic rise highlights how CGT has become an increasingly lucrative source of revenue for the Treasury, with successive governments gradually pulling more taxpayers into its net through lower exemptions and higher rates.
However, this wave of disposals may not last. Higher tax rates create an incentive for ‘tax lock-in,’ where individuals hold onto assets rather than triggering a CGT charge. If that happens, the Treasury’s current CGT windfall may prove short-lived.”
