The latest inheritance tax figures from HMRC show a continued strong upward trajectory over the past few years, which experts have attributed to frozen thresholds.
The current £325,000 nil-rate band has been at that level since 2009. The residential nil-rate band was introduced on a phased basis between 2017 and 2020 and potentially gives an additional £175,000 nil-rate band (making a total of £500,000), subject to certain rules.
The Office for Budget Responsibility (OBR) has suggested significant increases in inheritance tax take will continue over the next few years. Policy changes include limits to agricultural and business reliefs, extending the freeze in inheritance tax nil-rate bands to 2029/30, and including pensions in inheritance tax from 2027.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Inheritance tax continues to soar into the new tax year, with receipts up £98m on where they were at the same point last year. We could well be on course for another record-breaking year. These strong figures were put down to a small number of larger transactions than usual back in April, but as the months progress, we will continue to see more families dragged into the net, as frozen thresholds means fiscal drag remains a huge factor.
“Families have another looming issue on the horizon – from 2027, pensions are expected to no longer be exempt from inheritance tax. It’s a move that will drag many more people into the net and is making them rethink their plans. Those able to access their pensions may decide to gift some of it away to loved ones now rather than wait to leave it to them in their will.”
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Income tax, capital gains and stamp duty
The HMRC figures show that income tax fell 29% from April to £21.2bn – but this is still up 6% from May 2024, due to fiscal drag.
Capital gains tax surged in May, up 21% in a month and 44% in a year to £232m. Stamp duty came in at £918m in May – down from £1.3bn the previous month.
Rachael Griffin, tax and financial planning expert at Quilter, said: “As the country edges closer to the Autumn Budget, speculation continues about potential tax changes. Reports suggest Labour may look again at capital gains tax, dividend reliefs, and even consider further freezes to income tax thresholds. Combined with rising property and asset values, this could make the overall tax landscape significantly more punitive.
“In this environment, early and careful tax planning is essential. With thresholds still frozen and reliefs under review, the cost of inaction is only going to rise.”
