UK’s Inheritance Tax Reaches Near-Record Levels in the April

UK’s Inheritance Tax Reaches Near-Record Levels in the April

In April 2025, HMRC collected a staggering £780 million[i] in inheritance tax, marking the second highest monthly total ever. This represented an increase of £97 million compared to April 2024, a rise fueled by frozen thresholds and rising property values.

These April figures alone contributed to a record-breaking annual total of £8.2 billion[ii] in 2024–25, meaning more families across the UK are now caught in the inheritance tax net.

Why Tax Bills Are Rising

Two key forces are combining to push more estates into taxable territory. Firstly, the tax-free threshold—known as the nil‑rate band—has been fixed at £325,000 per individual since 2009. In addition, the residential nil‑rate band for passing a main home to children or grandchildren remains at £175,000.

Frozen until at least 2028, these thresholds fail to keep pace with rising asset values. As a result, ordinary homeowners and middle-income families are increasingly facing bills where none existed before.

Assets Pushing Estates Over the Limit

Property price inflation, particularly in London and the South East, has greatly inflated the value of many estates.

Official projections suggest the proportion of estates paying inheritance tax will soar (from 5.2% in 2023–24 to 9.5% by 2029–30.

Estate values are rising not just due to property but also other assets, and with thresholds unchanged, more estates breach the limits.

Policy Shifts Will Widen Tax Base

Future changes are set to broaden the estate tax net even further. In April 2027, pension assets currently outside estates will be included for inheritance tax purposes; a move expected to generate additional revenue.

At the same time, new rules expected in 2026 will place a cap on business and agricultural reliefs. This will remove important exemptions for owners of family farms or businesses.

What Policy Changes Means for Families

Changes in policy are resulting in families paying more inheritance tax, but this can be managed. The 7 year rule means that any gifting from one family member to another before they die is tax-free, explains inheritance expert, Provira. If the individual dies after 2, 3 or 4 years of this time, any tax is reduced on a sliding scale.

Other ways to manage inheritance tax include an annual exemption of £3,000, which must be recorded and contributing towards family house purchases. According to government law[iii], wedding gifts of up to £5000 from a parent, £2500 from a grandparent and £1000 from anyone else are also exempt from inheritance tax.

How to Respond Proactively To IHT Tax

Planning becomes crucial in light of these pressures. Simple measures such as making lifetime gifts, using annual exemptions, or leaving assets in trust can help reduce estate value.

Leaving your main home to children makes full use of the £175,000 residential nil‑rate band, while charitable gifts worth at least 10% of your estate can reduce the tax rate from 40% to 36%. Spouse exemptions and the transferable nil‑rate band between partners also play key roles in effective planning.

April’s near-record £780 million[iv] monthly take and rising trend in annual receipts both signal a shift: typically middle-income families now face inheritance tax consequences previously reserved for wealthier estates.

With the basic nil‑rate band at £325,000 and the residential band at £175,000, proactive estate planning remains essential if you wish to shield your loved ones from an unexpected tax burden.

[i] https://www.independent.co.uk/money/hmrc-inheritance-tax-iht-families-savings-homes-b2742887.html

[ii] https://ifamagazine.com/inheritance-tax-enjoys-record-8-2-billion-tax-haul-in-2024-25-750-million-up-on-prior-year/

[iii] https://www.gov.uk/inheritance-tax/gifts

[iv] https://www.independent.co.uk/money/hmrc-inheritance-tax-iht-families-savings-homes-b2742887.html