Inheritance tax receipts soar following Autumn Budget

Latest figures from HM Revenue & Customs (HMRC) revealed that inheritance tax (IHT) receipts have risen once again, reaching £5 billion in the first seven months of the 2024/25 financial year, marking an 11% rise compared to the same period last year.
These figures come in the wake of Chancellor Rachel Reeves’ recent Budget, which introduced significant changes to the inheritance tax system. Among the reforms were an extension of the freeze on current inheritance tax thresholds for an additional two years and the inclusion of inherited pensions within the scope of inheritance tax starting in 2027.

Between 2024-25 and 2028-29, the OBR now estimates the Treasury will collect more than £50bn in inheritance tax alone, a 19% increase of more than £8bn compared to the forecast made following ex-chancellor Jeremy Hunt’s Spring Budget in March.

To find out more about the effects of these changes, check out our recent article on succession planning for farmers. 

What is inheritance tax?

Inheritance Tax (IHT) is a tax levied by the Government on the estate of a deceased person in the UK. This includes all of their assets including property, personal belongings, and investments. 
However, this levy only applies to the total value of the estate that exceeds the IHT threshold or ‘nil-rate band’ - NRB. As of the 2023/24 tax year, the threshold is set at £325,000. Anything above £325,000 could be subject to up to 40% inheritance tax and anything below this threshold is tax-free.

The Residence nil rate band also plays a role in inheritance tax. The residence nil rate band was introduced in 2017 and is an amount that can be passed on after death without any inheritance tax payable in addition to the standard nil rate band, giving a potential of £500k exception per person or £1m for a couple.

Why are IHT receipts always on the rise?

The number of estates across the UK that are being pulled into the IHT net are increasing each year.

Total IHT receipts collected by the Government has been steadily on the rise since the IHT threshold freeze. This was initially announced by the then Chancellor, Rishi Sunak, in his 2021 Budget. The Budget outlined that the IHT threshold would be frozen for five years until 2026. However, after ex-Chancellor Jeremy Hunt’s 2023 Autumn Statement, it was confirmed that the freeze would be extended a further two years until April 2028, and then after Rachel Reeves’ 2024 Autumn Statement, this was extended once again for a further two years until April 2030.

Due to wage inflation coupled with ever increasing property value across the UK, the freeze essentially means that a greater number of people will cross the inheritance tax threshold each year. Many have been calling this move an example of ‘stealth tax’, as the freeze ultimately means an increasing number of Britons will fall into the tax threshold each year until the freeze ends in April 2030, and by then the Government will have collected billions in extra inheritance tax.

The inheritance tax allowance of £325,000 was increased from £312,000 on 6 April 2009.  This means the IHT nil rate band has been frozen for over 14 years now and will keep allowances frozen until at least 5 April 2030.  That’s a staggering 21 years of higher taxes on death.

If you’re interested in how to manage your inheritance tax to ensure the best possible wealth protection for you or your family, we can help. Give us a call on 0333 323 9065 or book a free non-committal initial consultation with a member of our team to find out more.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The Financial Conduct Authority (FCA) does not regulate tax advice.