Inheritance tax receipts reached a new record high last financial year due to tighter rules affecting property and wealth transfer.
Official figures released on Thursday show inheritance tax (IHT) receipts rose to £8.5 billion in the 2025-26 tax year, up from £8.3 billion the previous year.
The increase comes amid a broader increase in government revenues, which are up by more than 9% or £87.7 billion compared to the fiscal year ending 2025.
The latest rise reflects the combined effect of long-term policy measures, including a cap on the £325,000 nil-rate band and tighter rules introduced alongside the government’s non-dom reforms. Together, they have consistently drawn more assets into the tax net, increasing receipts year after year.
Further upward pressure is expected to persist until 2031, when current ranges will become unsustainable.
In particular, the latest figures do not yet capture the full impact of recent changes, including the extension of inheritance tax to some 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 Dial, head of estate planning at wealth management firm Evelyn Partners, commented: “Inheritance tax receipts for the 2025/26 financial year are approximately 2.4% higher than last year. There are no surprises on the increase, but as we have seen in recent months, it seems the rate of increase is slowing, and it is certainly lower than previous annual increases in IHT.
“Over the years, IHT revenues have increased significantly as the frozen nil-rate band continues to draw more estates and assets into the tax net as values rise.
“However, the backdrop has now changed slightly: London house prices, which have historically acted as a huge engine of IHT exposure, have fallen significantly in recent years. Official figures revealed yesterday that property values in inner London have suffered the biggest fall since the global financial crisis, with house prices in some of London’s most expensive boroughs falling for the fifth month in a row and falling at double-digit rates in February. Property prices across the South East have fallen in real terms over the past few years. There has been a decline since.
“This moderation is probably slowing the extent to which inflation-driven growth has pushed assets above the IHT threshold, 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 wealth growth can drive up the IHT bill, regardless of medium-term property market movements. Meanwhile, an aging population means more wealth, and more wealth belonging to the asset-rich boomer generation is being undervalued over time.
“High interest rates and the boom – albeit volatile – have also boosted cash balances and investments in recent years, leading to a rise in property values 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 the frozen limit.
“The key message for households is that IHT remains a long-term planning issue, not a cyclical one. Falling house prices may ease the pressure on margins, but without active planning, more properties will continue to contribute to increased HMRC receipts.”
strict enforcement
Susannah Streeter, chief investment strategist at the Wealth Club, believes the government has arguably messed up inheritance tax reform.
He said: “The crackdown on farmers and business owners proved unpopular and ultimately impractical, leading to a partial retreat from the relief cap. But years of frozen allowances, combined with new rules that will bring pensions within the scope of IHT, mean that it is not just the wealthy, but more ordinary families, who are being dragged into the tax net. Inheritance tax receipts have reached a new high of £8.5 billion, surpassing last year’s total and Marks the fifth consecutive annual record.
“HMRC’s strict enforcement is adding further pressure to an already difficult time for bereaved families. With the expansion of the tax base and sharp ‘cliffs’ in the relief system, proactive planning and accurate reporting has never been more important.
“The recent report also highlights the growing frustration that inheritance tax is increasingly impacting middle-income families, especially those whose wealth is concentrated in property or retirement savings. Frozen limits, unchanged for years, mean that more assets are being pulled into liability even without meaningful gains in wealth in real terms.
“Meanwhile, HMRC compliance activity continues to increase. 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 for months or years and result in additional tax, interest and penalties.
“Overall, rising property values, static allowances and increasing reporting requirements are creating a system that is increasingly out of step with economic reality, attracting assets that previously fell outside the scope of inheritance tax and leaving many families out of protection.”