Inheritance tax (IHT) receipts have hit a record high of £8.2 billion in the 2024-25 tax year, as rising asset values and long-frozen thresholds continue to draw more families into the tax net—even before major upcoming changes that will extend liability to pensions and farmland.
New figures from HM Revenue & Customs show a significant increase from £7.5 billion the previous year and more than double the £3.8 billion collected a decade ago. Financial advisers say the surge reflects a growing number of estates becoming liable for IHT due to soaring property prices and stagnant tax-free allowances.
The current £325,000 nil-rate band—above which estates are taxed at 40 per cent—has remained unchanged since 2009, while the additional £175,000 residence nil-rate band, introduced in 2017 for those passing on the family home to children or grandchildren, has also been frozen. These allowances will remain fixed until at least 2030 under current government plans.
With house prices, stock portfolios and savings rising over the years, many estates that would once have fallen below the threshold are now exposed. According to Savills, property now makes up 38 per cent of the average taxpaying estate, with stocks and shares accounting for 29 per cent and cash around 18 per cent.
Although only around 4 per cent of UK deaths currently result in an IHT bill, the tax is expected to become an increasingly significant revenue source. The Office for Budget Responsibility forecasts that receipts could reach £13.9 billion a year by the end of the decade.
Jonathan Halberda, a financial adviser at Wesleyan Financial Services, said the trend is no surprise. “With an increasing number of families being pulled into the scope of inheritance tax, the latest rise in receipts comes as little surprise. Each month we’re seeing the impact of frozen thresholds that no longer reflect current asset values, alongside an increasingly complex system,” he said.
“Many who wouldn’t have faced a tax bill just a few years ago are now being caught out, while others don’t realise their estate is at risk until it’s too late.”
The tax take is expected to rise further following policy reforms announced by the Treasury. From April 2026, relief on agricultural and business property will be capped at £1 million, with assets above this threshold subject to a 20 per cent tax. The move, intended to close perceived loopholes and prevent wealthier individuals from buying farmland to sidestep tax, is expected to raise an additional £520 million annually by 2029-30.
From 2027, pension pots will also fall within the scope of IHT—ending their current exemption. According to Treasury projections, this change could generate £1.46 billion annually, while consultancy Lane Clark and Peacock estimate that over the next two decades it could bring in up to £65.4 billion. By 2047, receipts from IHT on inherited pensions alone could rise to £6.2 billion per year.
The changes have sparked concern across the financial sector and among farming communities. While the government argues the reforms will make the system fairer and help fund public services, farmers have warned the cap on farmland relief may force the sale of family businesses to cover tax bills.
Halberda said including pensions in taxable estates would only add further complexity. “Instead of simplifying the process, bringing pensions under the IHT umbrella in 2027 adds further complexity. It’s a major change that we’re still waiting for more detail on. People need clarity, but in the absence of clear direction many are unsure where to turn.”
With the tax set to impact a growing number of middle-income households, calls are mounting for the government to review IHT policy in light of changing asset values and the increasingly blurred line between ordinary estates and so-called wealth.
