Wealth managers react to the latest figures from HM Revenue and Customs – showing another rise in inheritance tax IHT – and suggest ways of mitigating tax liability, notably on agricultural businesses, after the UK’s Autumn Budget included further IHT hikes.

Latest figures published by HM Revenue and Customs (HMRC) show another hike in inheritance tax receipts of £500 million ($626 million) compared with the previous year, reaching £5 billion over the period April to October 2024.

IHT receipts are continuing to grow, driven in large part by frozen nil-rate band thresholds and rising asset prices, continuing the upward trend seen over the last two decades. UK Chancellor of the Exchequer Rachel Reeves also announced in the UK’s Autumn Budget that inheritance tax thresholds – charged at 40 per cent above a threshold of £325,000 ($422, 000) – will stay frozen until 2030; inherited pensions will be brought into inheritance tax from 2027.

Agricultural Relief and Business Property Relief have also been reformed in the budget, meaning that from April 2026, the first £1 million of qualifying combined assets will have no inheritance tax at all, but for assets over £1 million a 50 per cent relief will apply, at an effective rate of 20 per cent. Qualifying shares on the Alternative Investment Market (AIM) will no longer have full exemption from IHT, instead from 2026 they will have an inheritance tax rate of 20 per cent if they are held for two years.

Here are some reactions from wealth managers to the rise and ways of mitigating tax liability, notably on agricultural businesses, after farmers recently gathered in London to protest against the IHT hikes proposed in the Autumn Budget.

Jonny Black, chief commercial and strategy officer at abrdn 
"IHT receipts are likely to keep rising, given the extension of the IHT threshold freeze at the Budget and the government’s proposed plans to bring pensions into its scope. If people haven’t made plans for passing on their wealth, it’s even more important that they do so now. And if they did have plans, they may need to revisit them. When we polled advice professionals ahead of the Budget, one in five said the pensions IHT change would be one of the most disruptive things the Chancellor could do for existing strategies. IHT is already a complex tax that can be tricky to tackle at a very sensitive time in people’s lives and advisors are instrumental in making it manageable and helping people plan with confidence.”

Alex Davies, CEO and founder of Wealth Club
“Inheritance tax was already an absolute cash cow for the government. The extreme changes announced in last month’s Budget which badly affect farmers, business owners, pension policyholders and investors, mean these figures are only going to increase over the coming years. We believe all the changes to inheritance tax made in the Budget are extremely short sighted. Firstly, the tax burden is already at its highest in 70 years and growth is very low. More tax is likely to stifle growth further. Secondly, these changes have given those affected no time to plan. It’s very much a case of “one day, that’s your money, the next day, it’s not”; a sentiment which is hardly going to encourage people to invest for the future whether that’s in their own business or in a savings vehicle such as a pension.

Davies outlines ways of mitigating IHT liability:

Giving money away early. Gifts taken out of regular income, which are not deemed to affect the giver’s standard of living, are inheritance tax free on day one – as are certain smaller gifts. Timing is key as you can give unlimited amounts away but typically these take seven years to be completely inheritance tax free. Of course, once you give away the money you’ve lost control. If you need it back for an emergency, that’s not an option.

Investing in unlisted companies that qualify for Business Property Relief. These are typically inheritance tax free after two years. Investing in unquoted businesses can be risky, however, unlike giving the money away, you retain control. From 2026 you will have an overall £1 million Business Relief Allowance. Anything in addition will be taxed at 20 per cent.

Investing in an AIM ISA. ISAs are not inheritance tax free. When you pass away, your loved ones could miss out on 40 per cent of your hard-earned cash.  AIM ISAs are a popular, although much riskier way, to reduce this. Currently after two years they could be IHT free. From 2026 the IHT will be halved to a rate of 20 per cent.

Agricultural Property Relief (APR) and ways to mitigate IHT 
Rob Goodley, partner at Blick Rothenberg, an audit, tax and business advisory firm
“Farmers should review their wills considering the proposed changes. Assets can still pass between spouses free of IHT, and when assets pass between spouses on death, there is an uplift in the asset’s base cost for capital gains tax (CGT) purposes despite the fact that no IHT liability arises. This can make onward gifts of assets by the surviving spouse to their children much more tax efficient.

“If an individual inherits a farm that is worth £11 million on the death of their parent, then that could give rise to a £2 million IHT liability. This is a significant liability to meet, and if there are minimal other assets passing on death, then paying the IHT liability will be difficult. Liabilities can be paid over a 10-year period. It has historically been the case that interest is payable where liabilities are paid in instalments like this, but the government has indicated that interest shouldn’t apply here. If dividends are taken from the business to fund this liability, those dividends themselves will be subject to income tax, meaning that the cash burden to the business will be around 50 per cent higher than the headline IHT liability. Those inheriting a farm may be forced to sell some land, if not the whole farm, to pay the IHT.

“This tax funding issue could be resolved with appropriate life insurance policies to ensure there is money available to cover IHT costs, and farmers should evaluate their current policies in light of the government’s proposals. There will also be benefits to making lifetime gifts to the next generation, rather than waiting until death to transfer assets. If the transferor survives for at least seven years after making a gift to an individual, then the gifted assets will not be subject to IHT. Where business assets are gifted, there is often no CGT to pay, meaning gifts can be made without a tax charge if done properly.

“However, the Government plans to introduce anti-forestalling rules for lifetime gifts made between 30 October 2024 and 5 April 2026 (inclusive) which will ensure that if the transferor dies on or after 6 April 2026, but within seven years of the gift, then the gift will be subject to this £1 million APR cap. So, farmers should get expert advice before making gifts, including from insurers, so they don’t risk the next generation being caught out by IHT. At the same time, it is important to not make any hasty decisions on the back of this announcement. The significant change to this relief is not due to become law until 6 April 2026, giving farmers time to consult tax experts on what to do next. We have not yet seen any draft legislation from the Government – so the final proposals could yet differ from what was announced in the Budget.

“Finally, we have already seen a significant backlash against the government in relation to these changes, and the backlash will likely grow in strength in the coming weeks. That backlash could result in a change or withdrawal of the proposed changes.” See more commentary here on agricultural businesses and changes to IHT.