The Headline
HMRC collected £8.5 billion in inheritance tax during the 2025-26 tax year — the highest figure ever recorded. The Office for Budget Responsibility projects receipts will exceed £14 billion annually by the end of the decade.
Why It Is Happening
The nil-rate band has been frozen at £325,000 since 2009 and will remain there until at least 2031. Meanwhile, property values, pension pots, and investment portfolios have continued to grow. The result is fiscal drag — more estates are being pulled above the threshold each year without any change in the rules themselves.
From April 2027, unused pension funds will also be included in estates for IHT purposes, further expanding the tax net.
Who Is Affected
This is no longer a concern reserved for the very wealthy. Families with a family home, modest savings, and a pension pot can now find themselves exposed. The average IHT bill exceeds £200,000, and that sum typically needs to be found before assets can be distributed.
What You Should Do
- Get a full estate valuation — including pensions and business interests
- Use annual exemptions — the £3,000 annual gift allowance and gifts from surplus income
- Consider lifetime gifts — potentially exempt transfers fall out of the estate after seven years
- Review trust options — discretionary and interest in possession trusts can still reduce exposure
- Prepare for the pension changes — review drawdown strategies and nomination forms before April 2027
The Key Takeaway
The £8.5 billion figure is not an anomaly — it is the product of frozen thresholds meeting rising asset values. Planning now, rather than waiting, is the most effective way to protect your family from an avoidable tax bill.
Speak to The Legacy Wills Company to review your estate’s IHT exposure.