Inheritance tax receipts have reached a new record high over the past financial year, driven by tighter rules affecting property and wealth transfers.
Official figures released on Thursday show that inheritance tax (IHT) receipts rose to £8.5bn in the 2025–26 tax year, up from £8.3bn in the previous year.
The increase comes amid a broader rise in government revenues, which climbed by more than 9%, or £87.7bn, compared with the financial year ending 2025.
The latest rise reflects the combined impact of long-standing policy measures, including the freeze on the £325,000 nil-rate band and stricter rules introduced alongside the government’s non-dom reforms. Together, these have steadily pulled more estates into the tax net, pushing receipts higher year on year.
Further upward pressure is expected to persist until around 2031, when current thresholds are due to be unfrozen.
Notably, the latest figures do not yet capture the full impact of more recent changes, including the extension of inheritance tax to certain family businesses and agricultural property, as well as the decision to bring pension savings into scope – measures that only came into force this month and are expected to further broaden the tax base in future years.
Ian Dyall, head of estate planning at wealth management firm Evelyn Partners, commented: “Inheritance tax receipts for the 2025/26 financial year are about 2.4% higher than the previous year. No surprises on the rise but as we have seen in recent months it does look like the rate of increase is slowing, and certainly this is less than previous annual rises in the IHT take.
“For years, IHT revenues have been boosted quite significantly as frozen nil‑rate bands steadily draw more estates and assets into the tax net as values increased.
“The backdrop now, however, is slightly altered: London house prices, which have historically acted as a big engine of IHT exposure, have cooled noticeably over recent years. Official data yesterday revealed the largest property value decline in inner London since the global financial crisis, with house prices in some of the most expensive London boroughs falling for the fifth month and at double-digit rates in February. Across the South East property prices have pulled back in real terms in the last few years.
“That softening is probably slowing the extent to which purely inflation-driven growth has pushed estates over IHT thresholds, particularly for those whose wealth is concentrated in property rather than diversified investments.
“Yet receipts are still rising, because with decades of wealth accumulation and many years of frozen allowances, even modest asset growth can inflate IHT bills, regardless of medium‑term property market movements. Meanwhile, an ageing population means more estates, and more estates belonging to the asset-rich boomer generation, are being assessed as time goes by.
“Higher interest rates and surging – albeit volatile – markets have also boosted cash balances and investments in recent years, increasing estate values at death even where headline property prices have stalled. At the same time, many families continue to delay or avoid difficult conversations about estate planning, often underestimating the cumulative impact of frozen thresholds.
“The key message for families is that IHT remains a long‑term planning issue, not a cyclical one. Falling house prices may ease the pressure at the margins, but without proactive planning, more estates will continue to contribute to rising HMRC receipts.”
Property valuations
HMRC is stepping up scrutiny of property valuations as part of a wider push on inheritance tax compliance, according to TWM Solicitors.
The firm’s research shows referrals to the Valuation Office Agency have risen by 23.5% over the past year, increasing from 11,845 to 14,631 in the 12 months to 30 September 2025.
Laura Walkley, head of private client at TWM, said: “HMRC is clearly focusing on property valuations as a significant potential source of revenue. There has been a noticeable shift towards questioning figures submitted in IHT returns, rather than accepting them at face value.
“If an executor fails to report a property value properly, there can be financial consequences for the estate such as additional tax and interest to pay – potentially by the executor personally.”
Tougher enforcement
Susannah Streeter, chief investment strategist, Wealth Club, believes that the government has arguably made a mess of inheritance tax reform.
She said: “Crackdowns on farmers and business owners proved unpopular and ultimately unworkable, forcing a partial retreat on relief thresholds. But years of frozen allowances, combined with new rules that will bring pensions into the scope of IHT, mean more ordinary families, not just the wealthy, are being pulled into the tax net. Inheritance tax receipts have hit a fresh high of £8.5bn, surpassing last year’s total and marks the fifth consecutive annual record.
“HMRC’s tougher enforcement is adding further pressure at what is already a difficult time for bereaved families. With the tax base widening and sharp ‘cliff edges’ in the relief system still in place, proactive planning and accurate reporting have never been more important.
“Recent reporting also highlights growing frustration that inheritance tax is increasingly affecting middle-income households, particularly those whose wealth is concentrated in property or retirement savings. Frozen thresholds, unchanged for years, mean more estates are being pulled into liability even without meaningful gains in real-terms wealth.
“Meanwhile, HMRC compliance activity continues to rise. More than 14,000 bereaved families have been investigated for potentially underpaid inheritance tax since 2022–23, with case volumes running ahead of last year. These enquiries, often triggered by data matching and valuation checks, can last months or even years and may result in additional tax, interest and penalties.
“Taken together, rising asset values, static allowances and expanding reporting requirements are creating a system that is increasingly out of step with economic reality, drawing in estates that would previously have fallen outside the inheritance tax net and catching many families off guard.”
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