Wealth manager react to new figures from HM Revenue and Customs - showing another increase in inheritance tax (IHT) - and look at ways of mitigating tax liability.

HM Revenue and Customs (HMRC) has just released new figures which show that inheritance tax receipts climbed by £600 million ($739 million) compared to the same time last year, reaching £6.3 billion in the nine months from April to December 2024. This continues the upward trend seen over the last two decades.

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. 

In 2023-4 tax year, HMRC raised £7.499 billion, but these figures show that they are on track to break through this figure.

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 ($400, 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 figures.

Nicholas Hyett, investment manager at Wealth Club
“Inheritance tax continues to be something of a golden goose for HMRC – with a tax take that seems to rise inexorably. It may only affect a small number of estates at present, but that number is growing all the time - suggesting “Britain’s most hated tax” is only set to become more unpopular. What really gets to many people about inheritance tax is the double taxation. You’re taxed on the money when you earn it and again when you die, resulting in combined income tax and inheritance tax rate of 67 per cent for additional rate tax payers – potentially more if you’re also paying National Insurance.

“One way to avoid the taxman having your cake and eating it too, is to make gifts out of surplus income. By making regular gifts out of leftover income at the end of the month you can pass money on to your loved ones free of inheritance tax. Gifts out of surplus income are particularly popular with grandparents, who use it to pay for things like school or university fees. Avoiding double taxation from inheritance tax is a nice added sweetener.”

He also highlighted the benefits of 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 can also reduce IHT. “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,” Hyett said.

Jonathan Halberda, specialist financial adviser at Wesleyan Financial Services
“Given that the inheritance tax threshold has been frozen at £325,000 until 2030, it’s almost inevitable that IHT receipts will continue to rise every month. And we can expect a jump in the number of estates that will be caught in the IHT net in April 2027, when an IHT exemption for money left in pensions on death is closed. This is something that will also pull more people who might not have thought of themselves as well-off enough to be hit by IHT into the tax net. More detail on exactly how this will be implemented should come out this year following the government’s consultation on the issue closing today. In the meantime, it is already focussing people’s minds on the potential tax bills that they could face – we’ve seen an increase in our customers considering gifting to help manage their tax liability. 

“If you haven’t already, now is the time to speak to an expert financial adviser and formulate a plan to pass on your assets as tax efficiently as possible. There are a whole range of options available, which include giving gifts of money or assets to loved ones is one of the most straightforward ways to reduce your inheritance tax liability. In general, every year you are allowed to give gifts of any value to a spouse or partner, or gifts of up to £3,000 to anyone else. You can also make regular payments out of your income, which can help stop the value of your estate exceeding the £325,000 tax-free allowance. But there are limits: gifts given less than seven years before you die can be taxed, depending on the gift’s value and your relationship to the recipient.

“Another way to reduce your inheritance tax liability is to put some of your assets in a trust, which means they technically don’t belong to you anymore, so they aren’t counted as part of your estate. A trust is a legal arrangement where assets are held by a trustee or group of trustees for the benefit of someone else, but you can still control how, when and to whom the money is paid out.

“Married couples and civil partners enjoy certain inheritance tax exemptions. You can leave your entire estate – including the family home – to your spouse or civil partner with no Inheritance Tax to pay, even if its value exceeds the £325,000 threshold. But couples who are living together, no matter how long they have been in a relationship, don’t qualify for this exemption. As a result, some couples inheritance planning may include getting married or forming a civil partnership.

“Having an up-to-date will is one of the most effective ways to ensure your estate is distributed according to your wishes. Without a will, you have no say over who inherits what or how much Inheritance Tax may have to be paid. By making a will, and reviewing it regularly, you can take advantage of all the exemptions and allowances that can help you keep your Inheritance Tax bill as low as possible.”

Alastair Black, head of savings policy, abrdn
 "IHT receipts ended the year on the up again, showing no signs of losing steam after 2024’s record-breaking climb. And they’re set to keep rising with the plans to bring pensions into IHT from April 2027 – the government’s consultation on which closes today. Expanding the scope to include pensions could cause real worry for families who have been relying on these to pass on wealth. While April 27 seems a long way away there is a lot to be worked through so we hope we don’t have to wait to long to get clarity on next steps from HMRC. Further, this consultation has highlighted exactly how complex IHT is so we hope the Government will take the opportunity to rethink the IHT system. Simplifying some of its elements could give families and advisers much-needed clarity and reassurance.” 

Paul Barham, partner at Forvis Mazars
“The latest figures from HMRC show that IHT receipts finished the 2024 calendar year at another record high with some £6.3 billion being collected in the past 9 months.. And it looks like many more families find themselves dealing with an unexpected tax burden, boosting the government's coffers. Considered planning is crucial - especially given IHT could apply to transferrable pension wealth from 2027. Making use of allowances while you are able to is essential.  

Tim Snaith, partner at Winckworth Sherwood 
“IHT revenues continue to steadily rise due to the prolonged freeze on IHT thresholds. The nil-rate band (NRB) and the residence nil-rate band (RNRB) have not been adjusted for inflation or rising property values, which means more estates are becoming liable for the tax as asset values increase. It remains a persistent and unavoidable inheritance tax planning issue, and one that should not be ignored. To avoid unexpected financial burdens, it is crucial for individuals to regularly review their wills and estate planning, with professional legal advice, to manage their wealth efficiently.”

Hilesh Chavda, private client partner at law firm Spencer West LLP
“It is difficult to argue with the calls for the Treasury to rethink how it imposes planned extensions of inheritance tax to retirement funds. Putting aside debates about the rights and wrongs of bringing pensions into the scope of IHT, the big issue is the administration. The proposed system is complex and requires a number of different people to be involved which will only create delays and further complexities in the release of these funds. With the six-month deadline to pay IHT, this is likely to result in interest on the inevitable late payments. The system of reporting and paying IHT on pensions does need a rethink as it is likely to impact families with less wealth than those with larger estates. The latter being more likely to have additional liquid assets to ensure the bill is covered on time.”

Simon Martin, head of UK technical services at Utmost Wealth Solutions
“Inheritance tax is delivering record receipts for the Treasury as asset prices rise while the thresholds remain frozen in place, a policy that has now been extended until the end of the decade. Additional reforms such as charging IHT on pension wealth at death and limits to agricultural and business reliefs will raise billions more pounds in tax receipts for the government and increase the proportion of estates liable for the tax. However, there are steps to mitigate the impact of inheritance tax and so people should urgently assess the value of their estate to see if they are likely to be impacted. We are seeing a significant increase in clients seeking professional advice around inheritance tax to ensure they fully understand the implications of the reforms. There are complexities such as the tapering of the residence nil rate band for estates of a certain value which can potentially add to inheritance tax liabilities.”