More UK estates are paying inheritance tax than ever before. HMRC has collected £7.1 billion in the first ten months of 2025/26 alone which is already £100 million ahead of the same point last year. Two months of the 2025/26 financial year remain. The pace of growth in the current period is more modest, though the upward direction remains unchanged.
The rise reflects a combination of frozen thresholds, rising property values, and an expanding scope of the tax. Upcoming legislative changes, such as the inclusion of pension funds from April 2027, are projected to push annual receipts to £14.5 billion by 2030/31.
A Fourth Annual Record in 2024/25 and the Numbers Keep Growing
Five years ago, HMRC collected roughly £4.6 billion in inheritance tax annually. By 2024/25, that figure had reached £8.2 billion marking the fourth consecutive annual record. That represents a rise of more than 50% in half a decade.
What the OBR Forecasts for the Full Year
The Office for Budget Responsibility (OBR) has forecast that inheritance tax will raise £9.1 billion across the full 2025/26 tax year. The figures published for April 2025 to January 2026 place current collections in line with that projection. The OBR's longer-range projections point to continued growth well beyond the current year.
Why More Estates Are Falling into the IHT Net
Three factors have contributed to the sustained increase in receipts. First, the nil-rate band has been frozen at £325,000 since 2009 and is scheduled to remain at that level until April 2031. Second, the residence nil-rate band, set at £175,000, is frozen for the same period. Third, property values across the UK have continued to rise, particularly in the Southwest, the Midlands, and the North of England.
As estate values increase but thresholds do not, a greater number of estates cross into taxable territory each year, without any change to the rates themselves.
HMRC Investigations into Underpaid Inheritance Tax Are Rising
More than 14,000 investigations into suspected underpayment have been opened since April 2022. In the current 2025/26 tax year, 3,636 new investigations have been launched.
HMRC has been deploying artificial intelligence and data-matching tools to identify discrepancies in inheritance tax returns. Common areas of error include the omission of personal assets such as jewellery and household items. The interest rate applied to overdue inheritance tax currently stands at 7.75%.
What Are the Upcoming Inheritance Tax Changes and When Do They Take Effect?
Several legislative changes affecting inheritance tax are scheduled across the coming years, spanning relief thresholds, pension rules, and property taxation.
Business and Agricultural Property Relief
From April 2026, the rules governing business property relief and agricultural property relief are due to change. Under the revised rules, 100% relief will apply to estates valued up to £2.5 million, revised upward from the £1 million figure originally announced in the 2024 Budget. The revised threshold is also transferable to a surviving spouse or civil partner on first death. Changes to relief on Alternative Investment Market holdings are also scheduled to take effect at the same time.
Pension Funds and Inheritance Tax
From April 2027, pension funds held at the time of death will form part of an individual's taxable estate. Currently, pension funds fall outside the scope of the tax. HMRC's projections indicate that approximately 153,000 estates will face a new or increased inheritance tax liability between 2027 and 2030. In the 2027/28 tax year alone, the average additional liability per affected estate is projected at approximately £34,000.
Further measures are also on the horizon. A council tax measure targeting higher value properties is scheduled to come into force from April 2028.Conclusion
The OBR projects that annual inheritance tax receipts will reach £14.5 billion by 2030/31. With nil-rate bands frozen until April 2031, pension funds entering the scope of the tax from April 2027, and further legislative changes scheduled from 2026 onwards, receipts are set to remain on an upward trajectory.
Inheritance tax receipts have risen in each of the past four years. The figures for 2025/26 suggest that trend is continuing.
- Could the Autumn Budget 2026 Bring Down the UK Mansion Tax Threshold to £1.5m? - 25 September 2026
- The Bank of England Interest Rate Stays at 3.75%. But Here’s the Catch - 18 September 2026
- The North Is Now the Fastest UK Rent Growth Region. Here’s What That Does to Rental Yields - 17 September 2026
