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 rise in inheritance tax receipts, reaching £5.7 billion ($7.15 billion) in the eight months from April to November 2024. Such figures will stir the pot of public debate on whether the freezing of the "nil-rate" band for IHT has drawn a wider net of people into a tax once preserved for HNW families.

The new figure is £600 million higher than the same eight months last year and continues the upward trajectory over the last two decades. Last full tax year, inheritance tax raised £7.499 billion and currently just one in 20 estates is liable but government estimates suggest that this will increase to one in ten estates by 2030.

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 changed, 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. The changes have prompted protests from farmers who fear that businesses will be broken up, for example. 

Here are some reactions from wealth managers to the rise their views on how to mitigate IHT:

Simon Martin, head of UK technical services at Utmost Wealth Solutions
“The IHT snowball continues to gather growing momentum as the extended freeze in inheritance tax thresholds and rising property prices looks set to continue delivering record tax hauls to the Treasury.

“Changes to the IHT and non-dom regime announced at the Autumn Budget will spread the net further, leading to more and more estates being caught up in the tax as the Treasury clamps down on certain areas. While inheritance tax is often perceived as one of the more unpopular taxes, there are steps that can be taken to mitigate its impact, and this budget will no doubt create the stimulus for people to urgently assess their circumstances.

“We expect to see a spike in demand for professional advice around inheritance tax as individuals reconsider their plans, which could see strategies shift to lifetime gifting earlier and more often to individuals or trusts and perhaps spending their pension pots. There could also be increased interest in insurance policies and death benefits that can protect individuals against these rising IHT liabilities.”

Jonathan Halberda, specialist financial advisor at Wesleyan Financial Services
“Another month, another increase in the government’s Inheritance Tax receipts. This was entirely predictable given that the £325,000 threshold has been frozen until 2030, which will inevitably drag more estates into the IHT net. The new year will also bring some extra clarity on the exemption that means pension funds can be passed on to beneficiaries after death without paying IHT. In the last budget, the Chancellor announced that this would be closed from April 2027, which she estimated would impact an extra 10,500 estates.

“It’s not exactly clear how this would be implemented, and a consultation is currently taking place, which closes in January. More transparency will support more effective estate planning, but in the meantime it is sensible to seek out expert financial advice to help formulate a tailored plan that’s right for you and your family and which takes into account the measures announced in the Budget.”

Nicholas Hyett, investment manager at Wealth Club
“Inheritance tax continues to be the gift that keeps on giving, at least as far as the government is concerned. Yet again HMRC is increasing the amount that it’s milking from the estates of the recently deceased. Decades of rising property prices have been a major driver, pushing estates above frozen nil rate bands, and from April 2027 pension pots will fall into the taxman’s net as well meaning even more families are dragged into paying this most hated of taxes.

“Farmers are already in uproar about the new Tractor tax, and removing IHT relief on familiy businesses could mean the final nail in the coffin for businesses that would otherwise have been passed on through many generations. These changes will harm many, many businesses and do not reflect the governments objectives to get the economy moving.

“All government’s need to balance short and long term priorities. Short-term financial gain may add pounds in the pocket now, but could easily lead to long term pain if people are put off saving to support themselves in retirement and businesses decide not to invest or shut up shop altogether.”

Despite recent reforms there are still ways to reduce the inheritance tax paid by your estate, although many of them do require time and more risk:

Those concerned about inheritance tax should consider:
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 toa rate of 20 per cent.”