Inheritance tax (IHT) receipts have soared to £7billion between April 2024 and January 2025, according to the latest figures released by HM Revenue & Customs (HMRC)
The substantial sum represents a £0.7billion increase compared to the same period in the previous year, highlighting the growing impact of inheritance tax on British families.
The figures emerge against a backdrop of mounting pressure on public finances, with geopolitical challenges prompting calls for increased Government spending in various sectors.
Ian Dyall, head of Estate Planning at Evelyn Partners, said the monthly increase in inheritance tax receipts points to “another record tax year for IHT revenues”.
He noted that estates across the UK continue to grow in value while nil-rate bands remain frozen.
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Inheritance tax is hitting Britons hard
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The tax expert warned that despite recent measures announced in the Budget, including new rules for pensions and business assets, further changes could be looming.
“Given the wide-ranging pressures on the public finances, with geo-political upheaval now prompting calls for greater defence spending, it might not be long before Rachel Reeves is again forced to seek new ways of boosting tax revenues,” Dyall said.
He suggested inheritance tax remains one of the few options available to the Chancellor to “wriggle out of the fiscal strait-jacket”.
Significant changes to inheritance tax rules are already in the pipeline, with pension pots set to become liable to IHT from April 2027.
The combined business and agricultural property relief exemption will be reduced to £1million from April 2026.
While the upcoming March spending review may not bring immediate changes, the autumn Budget could spark fresh speculation about tax reforms.
Experts suggest an overhaul of the gifting regime could be a likely target for the Treasury.
“That could close off some of the options that families have been using to reduce their IHT liability,” Dyall explained.
Many families have already increased their gifting activities, with some making large one-off transfers to start the seven-year clock for potentially exempt transfers.
Others are exploring lesser-known methods, such as gifts out of surplus income, to manage their tax exposure.
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As inheritance tax burdens continue to rise, more families are turning to insurance solutions to protect their beneficiaries.
Industry experts report a marked increase in clients seeking whole of life cover specifically designed to address future inheritance tax bills.
“Since October we have already seen many more clients seeking whole of life cover aimed at covering a future IHT bill so their beneficiaries will not have to foot it,” Dyall revealed.
The trend is expected to grow further, particularly as this option remains relatively unknown among families without professional advice.
With estates facing potentially higher IHT bills and fewer mitigation options, insurance-based solutions are becoming an increasingly attractive strategy for forward-thinking families.
