UK inheritance tax receipts for April 2024 to March 2025 reached £8.2bn, which is £0.8bn higher than the corresponding period last year, according to HM Revenue and Customs.
That is an increase of 10.8% on the same period of 2023/24.
Ian Dyall, head of estate planning at wealth management firm Evelyn Partners, commented: “The inheritance tax take for the Treasury has notched up another record financial year. That’s a trend that is unlikely to change as long as nil-rate bands remain frozen, which is currently until at least 2030. Even with market turbulence like we have seen recently, long-term increases in asset values tend to draw more estates across the IHT thresholds, and the inclusion of unspent pension funds in IHT liabilities from April 2027 – along with the dilution of agricultural and business reliefs next year – will give that trend a big leg up.
“Extended financial market turmoil and a possible recession could hit tax revenues and borrowing costs for the Government, in which case Treasury minds will wander towards further areas that can be tapped to shore up the public finances. So the Chancellor might not be done with IHT reform quite yet.
“The recent financial market turbulence will, however, have hit the value of some estates in the short term, especially those that are heavily invested in the stock market. One silver lining of this for some families could be an IHT rebate.
“If their estate was valued on death, say, six months ago and the IHT bill settled on the basis of that, then by the time probate is granted and assets have been liquidated, it could be that the total value of the estate has dropped. Executors should check the estate’s value at the point it is distributed to beneficiaries and compare this to the estimate given to HMRC when the IHT liability was calculated. It could be that the estate is due some money back from HMRC.”
Also reflecting on the latest data, Shaun Moore, tax and financial planning specialist at Quilter, commented: “While indicative of a significant boost for government coffers that will bring some relief to the Chancellor, the figures also serve as a reminder of the painful burden placed on UK households.
“PAYE income tax and NICs receipts for April 2024 to March 2025 came in at £486.9bn, up by a huge £17.6bn compared to the same period last year. Frozen income tax thresholds, which have now remained stagnant since 2021, have seen an increasing number of people paying income tax for the first time, as well as dragging many into higher rates each year.
“Without an explicit tax hike, and therefore without technically breaking its promise not to increase taxes on working people, the government has generated billions in extra income. What’s more, with employer national insurance payments rising from this month, this tax take will continue to climb.
“Alongside the heavier income tax burden, the government has hammered Capital Gains Tax in recent years. The Annual Exempt Amount once sat at a relatively generous £12,300, but is now just £3,000 and means many more people are having to pay CGT on even relatively small gains. More recently, the Chancellor increased the basic rate of CGT from 10% to 18% and the higher rate from 20% to 24%. As a result, Capital Gains Tax receipts have continued to climb, but there are some indications that people are thinking twice before realising gains.
“CGT receipts hit £399m in March 2025, bringing the 2024/25 tax year’s total to £13bn. This is slightly lower than last year’s £14.5bn. The higher rates and lower AEA could see more investors defer sales as they attempt to mitigate the tax, so we could see a slowdown in CGT receipts despite the harsher measures.
“Inheritance Tax receipts for April 2024 to March 2025 are £8.2bn, which is £0.8bn higher than the same period last year setting a new record. IHT thresholds, including the £325,000 nil rate band and the £175,000 residence nil rate band, are frozen until 2030. With several years of the freeze remaining, an increasing number of families will find themselves needing to pay often hefty tax bills.
“Property prices have grown rapidly in recent years, particularly in areas such as London and the South East, which in many cases will leave little to no room for additional assets to be left to loved ones before the tax is applied. Additional policy changes, including restrictions on Agricultural Property Relief and Business Relief from April 2026, as well as unused pensions falling within the scope of IHT from 2027, will place additional strain on families.
“IHT has long since been a deeply unpopular tax, and its reputation is unlikely to improve any time soon. What was once viewed as a tax on only the wealthiest of families has spread to middle income families, many of which may not even realise they are affected.
“Tax bills are becoming increasingly difficult to mitigate, and this will only worsen as the freeze on the various thresholds continues and as policy changes set in. Seeking professional financial advice will be key to ensuring no more of your money goes to the taxman than is absolutely necessary.”
