Inheritance tax (IHT) receipts have reached £5.2 billion in the first seven months of the 2025/26 tax year, £200 million higher than the same period last year, according to newly published HMRC data. This rise continues a long-term trend in IHT collections and comes just days before the Autumn Budget, placing extra focus on how frozen thresholds and recent legislative changes are bringing more estates into the IHT net.
Nicholas Hyett, investment manager at Wealth Club, commented that recent patterns in IHT growth provide a clear guide for what the chancellor might propose in the upcoming Budget. He highlighted that the main nil-rate threshold has been frozen at £325,000 since 2009. Had it been adjusted in line with inflation, it would now be close to £525,000, meaning estates are effectively paying more tax without any formal rate increases.
Hyett explained that this strategy allows the government to collect additional revenue quietly. By keeping thresholds frozen, the Treasury can increase its take from estates without appearing to raise taxes, an approach that has become a familiar feature of UK fiscal policy over the past decade.
Other tax allowances are also likely to be treated similarly, he noted, with income tax thresholds potentially remaining frozen well into the next decade. Targeted reliefs such as business relief, agricultural relief, and incentives for alternative investments have come under scrutiny. While these measures are often framed as closing loopholes, Hyett argued they have unintended consequences, affecting small businesses, family-run farms, and UK capital markets in ways not always immediately visible.
Hyett also speculated that symbolic interventions may appear in the Autumn Budget. These could include tweaks to salary sacrifice schemes or a “mansion tax” on high-value properties. While these changes might generate media attention, Hyett warned that their actual economic impact can be far-reaching, influencing property market behaviour and financial decisions for households and investors alike.
Pensions are another area where potential revenue could be targeted. Stripped of IHT relief in previous years and now facing national insurance implications on contributions under salary sacrifice schemes, pensions are a delicate focus for policymakers. Hyett suggested the government may examine gifting rules, such as extending the current seven-year period after which gifts are IHT-free or capping gifts made from surplus income. These steps could bring additional estates into scope.
Despite these opportunities, Hyett argued that the government is nearing the limit of what can be achieved through threshold freezes and incremental policy tweaks. If further revenue is required, any increase will have to be more visible and directly felt by taxpayers, rather than masked through subtle adjustments. He jokingly noted that if political administrations were taxed on their own mismanagement, the Treasury would benefit greatly.
Rachael Griffin, tax and financial planning expert at Quilter, highlighted that the rise in IHT receipts reflects a decade of frozen thresholds combined with rising property values. This combination has brought more individuals within the scope of the tax, including many who may not consider themselves particularly wealthy, raising concerns about the growing reach of IHT.
Griffin also emphasised that future receipts are likely to increase further as pensions become liable for IHT from 2027. She described this as a “turbocharge” for inheritance tax revenue, potentially drawing a far greater number of households into the IHT net and accelerating the pace of future collections.
The HMRC data demonstrates how gradual policy changes, when combined with inflation and property value growth, can have a cumulative impact on tax receipts. For many families, this underscores the growing importance of careful estate planning to manage potential IHT liabilities and avoid unexpected financial burdens.
With the Autumn Budget approaching, both advisers and taxpayers are closely monitoring potential announcements that could influence estate planning strategies, investment decisions, and wider financial management practices. The continued rise in IHT revenues highlights the importance of being prepared and understanding how small policy changes can compound over time.
Hyett and Griffin’s analysis suggests that while headline-grabbing changes may be limited, incremental measures like threshold freezes and small policy tweaks will continue to generate rising revenue, quietly expanding the IHT base and affecting a wider portion of the population than many realise.
For households approaching the nil-rate threshold, property owners, and those with substantial financial assets, understanding how these incremental changes interact with existing allowances has never been more important. Effective planning now can mitigate exposure to future IHT liabilities and preserve wealth for beneficiaries.
The broader lesson is that IHT growth is being driven less by formal rate increases and more by structural factors like frozen thresholds, property market inflation, and minor legislative tweaks. This slow expansion of the tax base is quietly reshaping the landscape of estate planning in the UK.
Looking ahead, it is clear that inheritance tax will remain a significant concern for many households. Financial advisers recommend reviewing estates, considering the impact of pensions, and keeping abreast of legislative developments to ensure strategies remain effective in a changing tax environment.
In summary, rising IHT receipts reflect a combination of frozen thresholds, property market growth, and incremental legislative changes, underscoring the need for households and advisers to plan carefully in advance of the Autumn Budget and beyond.
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