Inheritance Tax Receipts Spike Again
Why more families are being caught out – and what you can do about it
More families than ever are finding themselves on the hook for inheritance tax (IHT), as frozen thresholds continue to drag estates into liability.
HMRC collected £1.5 billion in IHT receipts during the first two months of the current tax year – a rise of nearly £100 million compared to the same period last year. That’s a 7% increase and yet another consecutive year of growth for the Treasury, as more estates fall outside of the available allowances.
This trend is being watched closely – especially with pensions due to be included in estate calculations from 2027. That change alone could see receipts rise even further.
Why does inheritance tax keep rising?
IHT is a tax on the value of your estate when you pass away. While there are rules and allowances in place, the main threshold- known as the nil-rate band – has been stuck at £325,000 since 2009.
That’s 16 years of ‘fiscal drag’, where rising property prices and general inflation have pushed more estates over the line, without the Government having to touch the rates.
Put simply, as the value of assets goes up, so does the tax take, even if the rules haven’t changed.
What can you do about it?
From 2027, pensions will be pulled into IHT calculations. For families looking to reduce their liability, this could be a major shift and it makes proper planning even more essential.
The good news is that there are ways to mitigate IHT, but they need to be structured, intentional, and within the rules. That means making the most of:
The Residential Nil Rate Band (currently £175,000) – which can be added to the main £325,000 allowance
Combined allowances for couples – up to £1 million of the joint estate can potentially be passed on tax-free
Gifting – including the annual exemption and the seven-year rule, which allows gifts of any size to fall outside your estate if you live for seven years after giving them
These are all powerful tools but they only work if used correctly and in the right order.
It’s not just about the tax
The real challenge with inheritance tax isn’t just the potential bill. It’s making sure your financial future and your retirement plans aren’t compromised in the process of trying to reduce it.
That’s where a proper financial plan can make all the difference.
If you’d like to review your own position or explore what changes in 2027 might mean for you and your family we’re here to help.