The total number of UK deaths that resulted in an IHT charge has also increased. In the tax year 2022 to 2023, there were 31,500 taxpaying IHT estates, an increase of 3,700 (13%) since the previous tax year, 2021 to 2022.
Annual Inheritance Tax liability statistics from HM Revenue and Customs today revealed that in the tax year 2022 to 2023:
Ian Dyall, head of estate planning at leading UK wealth management firm Evelyn Partners, comments:
‘This data really just confirms what we already know: that more families are incurring inheritance tax liabilities, and more assets in each estate are becoming subject to tax – even before the IHT measures announced at the last Budget take effect. As asset prices, especially equities and property, continue to rise the frozen nil-rate bands offer less and less protection against IHT and families that take no steps to mitigate their liabilities will either get drawn into the scope of IHT or have the tax levied on a greater proportion of their assets.
‘The OBR forecasts total IHT liabilities for 2024/25 to rise 11.6% on the previous year to £8.4 billion, while receipts data shows HMRC has so far taken £8.2billion for that period.[1] The OBR also forecasts that in the current 2025/26 tax year IHT will raise £9.1 billion.[2]
‘What these lagged annual liability figures do give us is some granular detail on how IHT is distributed and what reliefs are being used. First, while many more households are being drawn into the IHT net, it remains the case that the bulk of liabilities tend to be fairly concentrated among a small number of large estates. About 6,400 families with net wealth greater than £1.5million paid £4.3billion in IHT – or 64% of the total.
‘Families with that level of wealth tend not to garner much sympathy but the Treasury cannot sustainably prop up the public finances by taxing the wealthiest 1 or 2 per cent forever without consequence. The danger with seeking further taxation of wealth at the next Budget – whether that is via capital gains tax, inheritance tax or some other mechanism – is that such households, which are often wealth and business creators in themselves and quite mobile, could get fed up and leave the country.
‘As they are responsible for a good chunk of overall tax revenues in the UK that would be counter-productive.
‘Alternatively, they will change their behaviour in such a way as minimise tax liabilities. It’s likely that, as IHT at 40% deplete the estates of wealthy families more significantly year by year, more of them will take advice and seek ways of sidestepping the tax, such as shrinking their estates through lifetime gifting. Which is why the gifting regime could be in the sights of the Treasury for further reform.’
At her Autumn Budget last year, Chancellor Rachel Reeves announced that defined contribution pension pots will be included in estates’ inheritance tax liabilities from April 2027, and she also froze the nil rate bands for an extra two years, until April 2030.
She additionally reduced business and agricultural property relief from April 2026. The first £1mn of combined business and agricultural assets can still be passed on tax-free, but IHT will be levied at 20 per cent on the rest. A 20 per cent rate will also apply to AIM shares.
After these two IHT reforms have kicked in, annual receipts are forecast to rise to £14.3 billion in 2029-30, with around £2.5 billion of the rise in the intervening years due to the policies announced in October 2024.
Dyall continues: ‘Second, today’s figures confirm that after the spousal exemption (valued at nearly £6billion), the greatest protection against IHT was taken through business and agricultural property reliefs – a point that had obviously not gone unnoticed by Labour policy strategists in recent years. The combined value of agricultural and business property relief (APR, BPR) was £5.28 billion in the tax year 2022 to 2023, a rise of £0.86 billion on the tax year 2021 to 2022.
‘APR and BPR were introduced to help ensure the continuity of family businesses on the death of owner-managers. While some use of these reliefs might have been opportunistic, we won’t know how many farms and family businesses the crackdown will affect for several years, as the reliefs will be diluted from next April, but obviously the policy will play out among businesses for many years, unless reversed by a future government.’
[1] https://obr.uk/efo/economic-and-fiscal-outlook-march-2025/
HMRC tax receipts and National Insurance contributions for the UK - GOV.UK
[2] https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/inheritance-tax/
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