Between April 2026 and August 2026, Inheritance Tax (IHT) receipts reached £3.8 billion. June 2026 saw the highest receipts on record.
Background
So, what’s behind the increase? Rising asset values are part of the picture. Perhaps the biggest factor, though, is that key IHT thresholds haven’t kept pace with inflation.
The tax free threshold, known as the nil rate band (NRB), and other limits are currently frozen until at least 2030/31. By then, the NRB will have stayed at its 2009 level for more than 20 years. As values rise but thresholds stay put, more estates are drawn into IHT. This is known as fiscal drag.
These figures don’t tell the whole story, either. Restrictions to agricultural and business property reliefs from April 2026, announced in the 2024 Autumn Budget, haven’t yet fed into the system. There’s also the extension of IHT to unused pension funds at death, which takes effect from April 2027.
Planning – two points
1. If you’re unsure whether your estate could be liable for IHT, you’re not alone. With a headline rate of tax on death of 40%, it’s understandable that IHT can be a worry. But here’s the first positive: it still only affects a minority of estates.
There is normally no IHT to pay if:
> the value of the estate is below the £325,000 NRB,
> or you leave everything to a spouse/civil partner; a qualifying registered charity or community amateur sports club.
In some circumstances, the tax free threshold can rise to £500,000 through what’s called the residence nil rate band. This applies when the main family home is left to direct descendants, such as children or grandchildren. There are restrictions, though, for estates worth more than £2 million before reliefs.
2. The second positive is that available IHT reliefs and exemptions can make a real difference. Gifting money or assets, and using potentially exempt transfers or trusts to take value out of an estate, may be worth considering. The key is to plan ahead.
Here to help
With inflation continuing to edge up and thresholds staying level, reviewing your affairs from time to time can give you peace of mind. Whether you’d like to check your potential exposure to IHT or explore tax efficient ways to structure your wealth and assets, we’re here to help.