Inheritance Tax receipts for April 2024 to March 2025 are £8.2 billion, which is £0.8 billion higher than the same period last year, HM Revenue and Customs revealed.
That is an increase of 10.8% on the same period of 2023/24. The inheritance tax take for the Treasury has notched up another record financial year. Ian Dyall, Head of Estate Planning at wealth management firm Evelyn Partners, commented:
“That’s a trend that is unlikely to change as long as nil-rate bands remain frozen, which is currently until at least 2030. Even with market turbulence like we have seen recently, long-term increases in asset values tend to draw more estates across the IHT thresholds, and the inclusion of unspent pension funds in IHT liabilities from April 2027 – along with the dilution of agricultural and business reliefs next year – will give that trend a big leg up.
Extended financial market turmoil and a possible recession could hit tax revenues and borrowing costs for the Government, in which case Treasury minds will wander towards further areas that can be tapped to shore up the public finances. So the Chancellor might not be done with IHT reform quite yet.”
He said that the recent financial market turbulence will, however, have hit the value of some estates in the short term, especially those that are heavily invested in the stock market. He added:
“One silver lining of this for some families could be an IHT rebate.
If their estate was valued on death, say, six months ago and the IHT bill settled on the basis of that, then by the time probate is granted and assets have been liquidated, it could be that the total value of the estate has dropped. Executors should check the estate’s value at the point it is distributed to beneficiaries and compare this to the estimate given to HMRC when the IHT liability was calculated. It could be that the estate is due some money back from HMRC.”
Paul Barham, Partner at Forvis Mazars said that the latest figures from HMRC bring to a close another record fiscal year for IHT intake, with £8.2 billion total collected against £7.4 billion for the previous fiscal year (23/24). He continued:
“With the IFS predicting that by 2029–30, the share of deaths liable for inheritance tax will reach its highest level in over 50 years, a combination of frozen thresholds, as well as changes to Business and, controversially, Agricultural Property Relief are putting more pressure on an increasing proportion of families. And to add to the cauldron, pensions are planned to be included within estates from 2027. Historically this tax has made up a small proportion of the total tax haul, but perceptions of IHT being a preserve of the wealthy are set to change.
Mitigating the tax is possible, but considered planning is required for this – especially given the rumours of more changes to come, potentially making gifting harder. Making use of allowances while you are able to is essential, as well as knowing the rules around gifting and setting up trusts.”
Will Hale, CEO of Key said the “record-breaking” IHT receipts sharpen the focus on the complexity of planning for IHT and retirement. He added:
“Death is increasingly lucrative for the HMRC but what is needed is a radical reassessment of the role property wealth can play in terms of funding later life living as well as contributing to intergenerational financial planning.
Modern lifetime mortgage products can help with both of these objectives, subject, of course, to high-quality financial advice.”
As importantly, the money being paid out in IHT could arguably be better put to work staying within the control of families so boosting the UK economy and support the Government’s growth agenda and its drive for wealth equality and social mobility.”
Commenting on HMRC IHT receipts at £800 million higher than in the same period a year earlier, Tim Snaith, Partner at Winckworth Sherwood, said:
“IHT revenues continue to steadily rise due to the prolonged freeze on IHT thresholds. 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.”
