UK IHT Receipts Continue to Break Records in 2025
Inheritance Tax (IHT) revenues in the UK have been climbing steadily over the past two decades, with figures hitting record highs year after year. This trend is far from slowing down, posing significant financial implications for UK taxpayers and expatriates holding British assets. For many, navigating IHT can feel challenging, particularly as tax thresholds remain frozen and family estates are increasingly affected.
Understanding the current IHT landscape
According to recent HMRC data, IHT receipts surged to unprecedented levels, hitting £7 billion in the first 10 months of the 2024/25 tax year. This marks an 11% increase over the same period last year. A substantial £639 million was collected in January alone, representing a 15% year-on-year increase.
The 2023/24 tax year saw record-breaking total receipts of £7.5 billion. For 2024/25, the Office for Budget Responsibility (OBR) projects that this figure could climb to £8.3 billion. By 2030, OBR anticipates IHT receipts will reach a staggering £14 billion, which will effectively double the amount collected in the 2022/23 period.
Why are IHT receipts increasing?
Frozen IHT Thresholds
The nil rate band (NRB) for IHT has been frozen at £325,000 since 2009 despite significant inflation over the past 15 years. If adjusted for inflation, this figure would now exceed £500,000. Additionally, the residential nil rate band (RNRB), introduced to allow homeowners to pass property to children tax-free up to a certain limit, has remained fixed at £175,000 since 2021. Combined, these frozen thresholds mean more estates are subject to IHT as asset values continue to rise.
Rising property values
For many UK taxpayers, property remains the most significant asset in their Estate. With house prices growing steadily over the years, even modest homes now fall within IHT thresholds. The result? More families find themselves liable for a tax once targetting the estates of the wealthiest families.
Pension reforms
From April 2027, pensions will no longer remain exempt from IHT. This means funds left in a pension pot after an individual’s passing may face dual taxation, combining IHT with income tax. This can result in an effective tax rate of up to 67% for some beneficiaries.
Changes to Tax Reliefs
Reforms to Agricultural and Business Property Relief, effective from April 2026, will reduce the relief available for qualifying assets. The first £1 million will remain eligible for 100% relief, but assets exceeding that will receive only 50% relief, increasing IHT liability. Additionally, AIM shares, which are currently fully exempt from IHT after two years, will be taxed at a reduced rate of 20% starting in 2026.
Domicile System for Expatriates
Inheritance tax is applied to worldwide assets for individuals deemed UK-domiciled. From April 2025, domicile status has shifted to a system based on long-term residence. Depending on their residence history, expatriates who leave the UK may still face IHT on non-UK assets for up to 10 years.
The Future of IHT Receipts
The OBR’s forecast of £14 billion in IHT receipts by 2030 is rooted in several key factors, including continued growth in property values, the impact of pension reforms, and the tightening of reliefs. These projections reinforce the urgency of proactive estate planning, particularly for those with assets that straddle the UK and other jurisdictions.
Projected UK Inheritance Tax Receipts (2024/25 – 2029/30)
| Tax Year | Projected IHT Receipts (£ billion) | Notes |
| 2024/25 | 8.3 | OBR forecast; reflects continued rise in asset values and frozen thresholds. |
| 2025/26 | 8.7 | Anticipated growth due to fiscal drag and asset appreciation. |
| 2026/27 | 9.5 | Increase expected as asset values continue to rise. |
| 2027/28 | 11.2 | Significant rise projected with inclusion of pensions in taxable estates from April 2027. |
| 2028/29 | 12.2 | Continued growth amid policy changes and asset value increases. |
| 2029/30 | 13.9 | Projected peak before potential policy revisions. |
Strategies to Mitigate the Inheritance Tax
Effective estate planning can help reduce your IHT liability while ensuring more of your wealth benefits your family and heirs. Here are some actionable strategies to explore:
1. Make Use of the Nil Rate Bands
The NRB and RNRB allow a portion of your Estate to pass tax-free. Ensure that your Estate is structured to maximise these allowances. For example, the unused portion of a deceased spouse’s allowance can be transferred to the surviving spouse.
2. Explore Potentially Exempt Transfers (PETs)
Gifting assets during your lifetime can reduce the value of your Estate. If you survive for seven years after making the gift, the value will be excluded from IHT calculations. Consider your financial needs before making significant gifts, as these funds will no longer be accessible.
3. Use Trusts for Estate Planning
Trusts can be powerful tools for managing the distribution of assets and potentially reducing IHT. For example, a discretionary trust lets you set aside assets for beneficiaries while retaining an element of control. However, it’s essential to seek professional advice to understand the tax implications and ensure compliance with regulations.
4. Evaluate Overhaul Reliefs
If you own agricultural or business assets, check how the upcoming reforms from April 2026 could impact your IHT liability. Consider transferring partial ownership or restructuring your holdings to optimise relief. (link )
5. Update Your Pension Strategy
With pensions set to become subject to IHT, now is the time to review how your retirement funds are structured. Utilising your PCLS, taking your tax-free allowance, and either spending it or reinvesting it into non-IHT chargeable assets (for non-LTR) will keep them outside of your Estate and help minimise future tax exposure.
6. Plan for Intergenerational Wealth Transfers
Your IHT planning should consider multiple generations. Making strategic, smaller gifts to your children and grandchildren over time can reduce the burden on your Estate while also supporting their financial needs early on. Make sure to keep a record of all your gifts and transfers.
7. Consider Moving UK Assets Abroad
For expatriates, UK-based assets such as property or pensions will remain subject to IHT regardless of your residence status. Managing, disposing or relocating your UK assets may mitigate some tax exposure, depending on your unique circumstances, as long as you survive any tail period which is imposed on you for being a UK resident and becoming a non-UK long-term resident.
8. Seek Professional Guidance
Estate planning is complex, particularly if you have substantial assets or international interests. Professional advice can help you develop a tailored strategy that aligns with your financial goals and family needs. Advisors with expertise in cross-border issues are particularly valuable for expatriates.
Proactive Estate Planning is Key
The rising trend in IHT receipts underscores the importance of timely and deliberate estate planning. Without a proactive approach, a significant portion of your wealth could fall into the government’s hands rather than your family’s.
Start by reviewing your Estate to identify potential IHT liabilities and explore strategies to mitigate them. If you’re unsure where to begin or would like expert advice, don’t wait. Working with experienced financial and tax professionals can help you create a robust plan that protects your hard-earned wealth and optimises the amount you pay. Schedule a consultation with Soteria Trusts today and take control of your Estate with our professional services.
