UK Inheritance Tax Receipts Climb to £2.2 Billion Amid Policy Changes

In a notable financial development, the United Kingdom's inheritance tax (IHT) receipts surged to £2.2 billion in the first quarter of the current tax year, marking an increase of £100 million compared to the same period last year. This uptick signifies a continued trend of rising IHT revenues, which have been on the rise over the past two decades, according to data released by Her Majesty's Revenue and Customs (HMRC) on July 22, 2025.

This increase is particularly significant as it represents a 4.8% rise over the previous fiscal year, which had already set a record for IHT revenues. Financial analysts, such as Nicholas Hyett, an investment manager at Wealth Club, have described the IHT as a "meal ticket" for HMRC, arguing that the ongoing freezes on thresholds have led to more estates becoming liable for this tax.

"While only a small percentage of estates are currently affected, this number is growing due to years of frozen thresholds, coupled with rising property prices and inflation," said Hyett. He pointed out that the current inheritance tax allowance has remained stagnant at £325,000 for 16 years and is scheduled to remain unchanged until 2030. Furthermore, the residence nil rate band of £175,000 has not been adjusted since 2020.

The Office for Budget Responsibility forecasts suggest that IHT could generate £9.1 billion by the tax year 2025/26 and potentially exceed £14 billion by 2029/30. These projections indicate a troubling trend for families, many of whom do not consider themselves wealthy but may be obliged to pay IHT due to the rising value of their estates.

Ian Dyall, head of estate planning at Evelyn Partners, has also raised concerns about the impending changes to the treatment of pensions under IHT regulations. Starting April 2027, pensions will be included in the calculations for IHT liabilities, which could lead to significant increases in tax bills for bereaved families. Dyall noted, "The anticipated changes will likely result in many more estates facing IHT, particularly as property and equity valuations remain high."

The implications of these tax policies are profound, as they create an added burden for families already grappling with the loss of loved ones. Sir Steve Webb, a former pensions minister, criticized the additional bureaucratic hurdles that the new pension rules will impose on grieving families, suggesting that the government should reconsider the penalty rules surrounding late payments of IHT.

In response to the growing criticism, a Treasury spokesperson stated that nine out of ten estates would continue to be exempt from IHT by 2030, emphasizing that the first £325,000 of any estate can be inherited tax-free. They also highlighted the allowances that increase when a residence is passed to direct descendants and when an estate is inherited by a surviving spouse or civil partner.

As the debate around inheritance tax intensifies, financial experts are calling for a reassessment of the thresholds and policies governing IHT. With many families unknowingly crossing into tax liability due to stagnant allowances and rising property values, the government may face increasing pressure to reform the inheritance tax system in the upcoming Autumn Budget discussions.

In conclusion, the rising inheritance tax receipts reflect broader economic trends and policy decisions that may have far-reaching implications for families across the UK. The discourse surrounding inheritance tax will likely continue as stakeholders push for clarity and fairness in the tax system, particularly in light of the significant changes to pension regulations scheduled for 2027.