Inheritance tax receipts hit report excessive as frozen thresholds drag extra individuals into the web

Inheritance tax receipts hit a new record for the fourth year in a row, with experts predicting the figures will only rise further in the coming years.

The latest HMRC figures show that inheritance tax receipts from April 2024 to the end of January 2025 reached £7billion.

It means the tax take for the period increased by £700million compared with the same period a year ago – and it’s only set to rise.

The headline rate of inheritance tax is 40 per cent, charged over the £325,000 threshold, with an additional £175,000 allowance granted to direct descendants.

Spouses and civil partners can share their allowance, meaning they can pass on £1million to their children tax-free.

In recent years growing numbers of people have had to pay the death tax as frozen thresholds and soaring house prices have pulled them into the IHT net.

IHT bump: Fiscal drag has pushed more people into paying inheritance tax 

Around 4 per cent of estates pay IHT but the Institute for Fiscal Studies predicted this would grow to over 7 per cent by 2032/33 before changes made in the Budget.

Changes announced by Rachel Reeves in the Budget mean it will be harder to mitigate, with those having private pensions and farmers stung the hardest.

Pensions will no longer be exempt from IHT, bringing pension pots into a person’s estate from 2027.

From April 2026, tax will have to be paid on inherited agricultural assets worth more than £1million.

Current rules allow small family farms to be passed on to family without paying IHT, but recent changes mean that from April 2026 20 per cent IHT will be paid on agricultural assets over £1m.

Farmers have warned that the changes will force them to sell off land that has been kept in their families for generations to pay the charges.

Shaun Moore, tax and financial planning expert at Quilter: ‘Despite repeated calls for reform, the government continues to rely on IHT as a growing source of revenue. 

‘Without intervention, the number of families caught in the IHT trap will continue to rise, forcing many to rethink their estate planning strategies.’