Thousands face 'sudden and unexpectedly large' inheritance tax bills as HMRC receipts hit £6.6billion

While the pace of growth has slowed, receipts remain on track to exceed last year’s record and reach the Office for Budget Responsibility forecast of £8.7billion for the full year.

The steady climb in IHT revenue reflects what experts describe as a "fiscal drag effect" — where rising property and asset values push an increasing number of estates beyond the threshold at which the tax becomes payable.

With nil-rate bands remaining frozen, more families find themselves caught by a levy that was once considered the preserve of the wealthy.

Business owners face a critical deadline with significant changes to inheritance tax reliefs coming into force on 6 April.

A new cap on agricultural property and business reliefs will mean many entrepreneurs and their families confront substantially higher tax bills upon death.

Ian Dyall, Head of Estate Planning at wealth management firm Evelyn Partners, warns that "a sudden and unexpectedly large IHT bill, particularly where liquid assets are in short supply, could spell the end for even a successful enterprise and the jobs it provides."

The timing is especially difficult for business owners who are already dealing with higher costs, including tariff threats, changes to business rates, rising National Insurance and increases to the minimum wage.

However, Mr Dyall notes that asset transfers made before the April deadline can still be completed without immediate tax charges — an option that will become more restricted afterwards.

Trusts are emerging as a potentially crucial tool in this planning, requiring urgent attention to complex legal and tax matters.

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Recent data reveals a notable surge in trust registrations, with those established during the 2024/25 tax year accounting for 14.5 per cent of all existing trusts.

While some of this increase stems from anti-money laundering registration requirements, Mr Dyall observes heightened client interest in trusts following the October 2024 Budget.

That fiscal statement introduced not only the agricultural and business relief changes but also confirmed that unspent pension assets will fall within the scope of inheritance tax from April 2027.

The nil-rate bands will remain frozen until April 2031, meaning climbing asset values will continue dragging more households into IHT liability.

Mr Dyall cautions that "best estate planning practice is often far from straightforward," suggesting that growing numbers of families will need to seek professional guidance if they wish to effectively minimise their exposure to the tax.

With the tax year drawing to a close in just a few months, households concerned about their overall tax burden have limited time to act.

Nick Henshaw, Head of Intermediary Distribution at Wesleyan Financial Services, emphasises the urgency: "We're 15 months from the April 2027 pension changes and that window is tighter than most clients realise."

He adds that "the conversations happening now — modelling drawdown scenarios, reviewing estate structures, quantifying the tax impact — are what separate proactive planning from panic decisions."

Practical measures remain available to those seeking to protect their wealth, including maximising ISA contributions, pension funding where appropriate, and utilising annual gifting allowances.

For many households, forward planning has become less about elaborate tax avoidance strategies and more about shielding income and savings from an increasingly demanding system that erodes wealth through fiscal drag year after year.