Inheritance tax (IHT) receipts have surged to £1.48 billion in just two months, prompting growing concern among families looking to protect their estates from mounting tax bills.
With thresholds frozen until 2030 and inheritance tax changes rom 2027 under scrutiny, financial planners say more households are likely to be drawn into the IHT net, many without realising it.
Inheritance tax receipts rose by £97 million year-on-year in April and May 2025, a seven per cent increase that reflects a broader upward trend following the record £8.2 billion collected during the 2024/25 financial year.
Financial planning experts are urging families to consider gifting strategies to reduce their inheritance tax exposure. The surge in receipts follows the Autumn Budget's confirmation that both the Nil Rate Band and Residence Nil Rate Band will remain frozen until at least April 2030.
Chancellor Rachel Reeves also announced that from April 2027, pensions will no longer be exempt from inheritance tax. That means that inheritance tax may have to be paid on one's pension when they die.
Kerry Drysdale, Head of Holistic Planning at St. James's Place said: "With inheritance tax thresholds failing to keep pace with inflation and pensions being brought into scope, more estates are likely to fall into the IHT net - creating unexpected tax burdens for beneficiaries."
Several key gifting exemptions can help reduce inheritance tax bills
GBNEWS/GETTYSeveral key gifting exemptions can help reduce inheritance tax bills.
She said: "The annual exemption allows individuals to give away £3,000 each year, plus the previous year's exemption if not already used. Combined over two years, this amounts to £6,000 of IHT-free gifting.
"Additionally, individuals can give away £250 to any number of recipients each tax year, provided no other exemption is used for the same recipient."
Wedding gifts offer further opportunities, with parents able to give up to £5,000, grandparents £2,500, and other individuals £1,000.
She added: "Unlimited gifts can be made to qualifying charities, political parties or for national benefit, which are fully exempt from IHT."
Regular income can also provide opportunities for gifting. Unlimited gifts are permitted, provided they form part of an individual's normal expenditure, are made from their income, and do not reduce their usual standard of living after the gifts are given.
For those with substantial assets, more sophisticated planning may be appropriate. Drysdale said: "Larger gifts of surplus capital can be considered if you have sufficient resources to sustain your own lifestyle.
The standard inheritance tax rate is 40 per cent above the £325,000 threshold, which many Britons are being pulled into paying GETTY"This could be an outright gift to a chosen beneficiary or a gift into trust which provides you with more flexibility and control over who receives what and when," she explains.
Drysdale emphasises the importance of documentation: "It's a good idea to keep clear records of your income and expenditure when using gifting exemptions to demonstrate that the necessary conditions have been met."
The Office for Budget Responsibility forecasts inheritance tax will generate £9.1 billion for the Treasury in 2025/26, with revenues expected to exceed £14 billion by 2029/30.
The Government's proposals to include pensions within estates for inheritance tax purposes from April 2027
GETTY"Over the past four years, rising asset prices and frozen thresholds have combined in a pincer movement to drive consecutive record annual totals," says Stephen Lowe, Director at retirement specialist Just Group.
Andrew Tully, Technical Services Director at Nucleus, warns that receipts have increased more than 50 per cent over the past five years. "These changes are likely to make IHT a more relevant issue for many more families within the next five years," he states.
The Government's proposals to include pensions within estates for inheritance tax purposes from April 2027 will likely drive further increases in the number of families affected.
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