Inheritance tax receipts hit £3.7 billion in the first five months of the 2025/26 tax year, according to data released by HM Revenue and Customs (HMRC) this morning.
This is £0.2 billion higher than the previous tax year and continues an upward trend over the last two decades.
Nicholas Hyett, Investment Manager at Wealth Club said, “Inheritance tax continues to be a cash cow for HMRC. While wealth taxes, IHT’s uglier sibling, will be in the spotlight in the run up to the Autumn Budget it wouldn’t be entirely surprising to see further tinkering with IHT too.
As things stand inheritance tax may only affect around 1 in 20 estates, but that number is on the increase as an ever greater number of estates become liable for the most hated of taxes. Years of freezes in thresholds, matched with increasing house prices and rising inflation have pushed more families, who might not consider themselves to be wealthy and would not historically have qualified for the tax, over the threshold.
The current inheritance tax allowance has been frozen at £325,000 for 16 years, and remains frozen until 2030. The £175,000 residence nil rate band hasn’t changed since 2020. These freezes are a stealth tax, which allows the government to increase their take without a backlash from a headline grabbing tax hike, but still contribute to the highest tax burden in 70 years.
In this environment lifetime gifts are probably more attractive than ever, particularly regular gifts out of leftover income since these are immediately free of inheritance tax. This approach is particularly popular with grandparents, who use it to pay for things like school or university fees. Avoiding double taxation from inheritance tax is a nice added sweetener.”
Leave a Comment