Taxing the Legacy: Inheritance Revenue Hits a New Record
HM Revenue & Customs revealed that from April to November 2024 the country raked in £5.7 billion from inheritance tax. That’s a hefty £600 million more than the same stretch a year ago, and it keeps that upward trend going for the last 20 years.
So What Does This Mean for Everyone?
In the last full tax year, inheritance tax pulled in £7.499 billion. At present, only 1 in 20 estates hits the tax. The government, however, predicts that by 2030 this could jump to 1 in 10—a considerable increase.
- Rising property values have pushed many estates above the frozen nil‑rate band.
- From April 2027, pension pots will also get a slice of the pie.
- Families are having to feel the sting of what many consider the most hated tax.
Words from the Field
Nicholas Hyett, an Investment Manager at Wealth Club, had this to say:
“Inheritance tax continues to be the gift that keeps on giving, at least from the government’s perspective. HMRC is looking to increase the amount it extracts from estates. Decades of rising property prices have nudged estates above the frozen nil rate bank, and now, with pension pots coming into play, even more families will feel the tap of the taxman.”
It isn’t just a numbers game. The Tractor tax is stirring rice‑stalk fury among farmers, and cutting inheritance relief for family businesses could be the final nail in the coffin for enterprises that rely on passing on generations of equity.
The Bigger Picture
The government’s short‑term gains may add a few pounds to the coffers now, but the long‑term consequences could be a painful doughnut of economic pain. If people are discouraged from saving for retirement or businesses decide to pull the plug on future projects, the collective social and economic fabric could feel the squeeze.
In short, while the tax gets a boost today, the future could see the economy taking a dry‑run event that might have been avoided.
What can investors do to mitigate their inheritance tax bill?
How to Sweet‑Taste Your Inheritance Tax Savings
Even with the newest tax reforms, folks still have a few tricks up their sleeves to slash the amount your estate owes. The catch? These strategies can be time‑consuming and dance on the edge of risk.
Quick Low‑Risk Options
- Lifetime Gifts: Dump a little cash or property into trusted hands before you’re gone.
- Charity Donations: Kick a chunk out to a good cause and watch the tax bite lessen.
- Use Exemptions: Make sure you’re tapping every available exemption—no one likes paying extra.
High‑Risk, High‑Reward Moves
- Life Insurance Front‑Door: It’s a clever loophole, but tread carefully. The paperwork can be a maze.
- Structured Settlements: Sometimes splitting assets can dodge the heavy hand of the tax man.
Bottom line: If you want to keep your estate’s health in check while still keeping the tax man from eating everything, you’ve got options. Pick the ones that fit your timeline and risk appetite, and go from there.
Those concerned about inheritance tax should consider
Early Money‑Slinging: The Fast‑Track to Tax‑Free Gifting
Picture this: you toss a little cash into someone’s favourite charity or give your cousin a few hundred pounds. If it’s a small gift or a gift that doesn’t touch your own lifestyle, the first day it leaves your pocket it’s IHT‑free. Yep, that’s the instant jackpot!
Timing Is Your Best Friend
- Give away the money now, but wait seven years for it to become totally tax‑free the rest of the time.
- Once you send it out the door, you can’t snatch it back if your favourite pet gets alopecia. No bossy dad or you can’t retrieve it in an emergency.
So if you’re thinking “I’ll just give a pot of gold to my nephews,” you’re giving them the free‑ride—once the five‑year countdown is up, they’ll keep it with zero tax drama. And if you’re rolling the dice with a split stash, you’re still in the clear.
Flip the Switch with Business Property Relief
When you pour cash into a business that doesn’t have tick‑box stock certificates (think unlisted or private businesses), you’re looking at a tax‑free sweet spot after just two years. You keep the keys in your hand, so if you need that cash fast, you’re not stuck waiting for money to be written off the books.
- From 2026 onwards, there’s a £1 million Business Relief Allowance – anything over that kicks in a 20% tax. So, plan your investment portfolio like you’re planning a birthday cake: aim for the sweet spot.
AIM ISAs: A Roller‑Coaster for the High‑Rollers
Wanted to play it safe?
- ISAs aren’t inherently IHT‑free. Your loved ones could devour a hefty 40% of your stash once you’re gone.
- Enter AIM ISAs – the <5% risk, potentially IHT‑free after two years, but brace for that extra jitteriness.
- Keep in mind, from 2026 the IHT cost drops to a mere 20%, turning your investment into the ‘nest‑egg’ of a lifetime.
Bottom line: whether you’re gifting handouts, investing in a niche company, or catching the AIM ISA bandwagon, the timing and control angle is king. Pick your strategy, set the clock, and secure the IHT‑free future for you and your loved ones. Happy planning!
Changes to Inheritance tax announced at the Autumn Budget included
Inheritance Tax Gets a Long‑Haul Chill Until 2030
Good news? Bad news? And a grisly future instead of a grand‑final showdown. In short, the UK has locked the Inheritances Tax (IHT) thresholds down for a full two more years—so, no changes until 2030.
Cold‑Core of the IHT Freeze
- The IHT thresholds remain frozen through 2030. Policymakers are basically taking a long, chilly breath and saying “hold on, we’ll revisit later.”
Fresh Reliefs for Farming & Business (From April 2026)
If you’re a farmer or own a small business, you might just breathe a sigh of relief.
- From April 2026, the first £1m of qualifying combined assets (think agricultural lands + business property) is completely tax‑free.
- Anything over that pound: you’re taxed at 50% of your usual rate, which translates to an effective IHT rate of 20%.
AIM Shares: No More Full‑Exemption (Effective 2026)
Shareholders in AIM stocks, you’re no longer in the “full‑free” zone.
- From 2026, any qualifying AIM shares you hold for two years will incur a 20% inheritance tax.
Inherited Pensions: Big Tax Alert (From 6th April 2027)
There’s a new twist for pension lovers. Your folks may find out that inherited pensions can now be taxed twice.
- Besides the usual income tax paid to the pension recipient, the pension itself could be hit with IHT.
- This could mean the effective taxation rate climbs up to 67%—but keep an eye out for upcoming discussions and consultations.
So, while the core thresholds are still on pause, the fine‑print has been tightened up. Whether you’re a high‑net‑worth heir or a small farmer, the next few years will shape how your family’s wealth rolls over.
