Inheritance tax haul hits another record
The government raked in a record amount of cash from inheritance tax, as receipts for the unpopular levy were boosted by frozen thresholds sucking in a record number of taxpayers and ballooning asset prices.
The exchequer collected a total of £7.1bn between April 2025 and January 2026 from the tax, official HMRC figures show, a £100m jump on the same period last year.
The intake was carried higher by the years-long freeze of the threshold at which inheritance tax is levied on people’s estates. The main nil-rate band has been held at £325,000 since 2009, meaning more people’s estates are dragged above the threshold with rising asset prices and inflation.
The process – known as fiscal drag – has helped drive consecutive years of record receipts from the 40 per cent levy, which is applied on assets passed down as someone’s death.
On top of the £325,000 cut off, there is also a £175,000 allowance for households inheriting a main home from a relative.
Government crackdown to carry inheritance tax receipts even higher
The record figures come before the spate of changes announced by Rachel Reeves in the 2024 Budget to inheritance tax come into force, with most due to kick in in April this year.
At her maiden fiscal event, the Chancellor clamped down on a host of decades-old carve outs from the levy enjoyed by farms, family-owned businesses and shares held on London’s junior stock market, Aim.
She also brought an end to the longstanding relief on pensions savings, which will be brought under the inheritance tax net from April 2027.
Mike Winstanley, director of wealth management at Bentley Reid, said the the figures show “direction of travel” for future inheritance tax hauls “is clear”.
“For clients, the impact is increasingly material,” he added. “Inheritance tax at 40 per cent is not marginal, it meaningfully alters the intergenerational transfer of wealth.
“Where an estate sits at £3–5 million, the tax liability can comfortably exceed £1 million without structured planning in place.”
The figures were further bolstered by a years-long trend of rising asset prices, bolstering the overall value of households’ estates. Since the start of 2024, the FTSE 100, London’s index of blue-chip companies, has risen by some 38 per cent, while the S&P 500 – the US equivalent – has been carried 43 per cent higher on an frenzy of of tech and artificial speculation.
House prices have also continued to rise steadily, though at a markedly slower pace than equities.
“Inheritance tax revenues continue to climb as frozen thresholds pull more families into the tax net,” said Amit Joshi, managing director of wealth at Mattioli Woods.
“What is most concerning isn’t the tax itself, but the lack of awareness. Families often only realise the impact when it’s too late to act. Inheritance tax has become a planning issue by stealth, and the cost of inaction is measured in lost choices, rushed decisions, and unnecessary tax.”