HMRC’s Inheritance Tax Numbers Are Still On the Rise
HM Revenue and Customs just pulled the latest numbers: £6.3 billion collected in inheritance tax during the nine‑month period from April to December 2024.
That’s a tidy £600 million bump over the same stretch a year earlier and keeps the long‑term upward trend going strong.
Why This Matters
- In the 2023–24 tax year, HMRC raised £7.499 billion. The current figures suggest they’ll beat that mark before the year ends.
- Only about 4 % of estates currently face an inheritance tax bill, but forecasts predict that will jump to 10 % by 2030.
Expert Take: Nicholas Hyett’s Hot Take
Investment Manager at Wealth Club, Nicholas Hyett, calls inheritance tax a “golden goose” for the government. “It keeps getting higher and higher—just a few estates now but the number is swelling every day,” he quips.
The tax’s reputation as Britain’s most hated levy is set to worsen, as you’ll see.
Double Taxation: The Real Pain
Most people are dinged for two reasons: you’re taxed when you earn the money, and then again when you pass it on after you die. For those paying the top marginal income rate, the combined tax load can hit 67 % (or even more if you’re still chewing through National Insurance).
How to Keep the Cake (or at least the crumbs)
One clever escape hatch is the “gift out of surplus income” strategy. Use any extra cash you have at the end of each month to give gifts to relatives—no inheritance tax kicks in because you’re emptying the money while you’re still alive.
It’s popular among grandparents, who often send these gifts straight into school or university fees, turning a tax headache into a sweet little surprise for their heirs.
Bottom Line
Inheritance tax is climbing, but with a bit of savvy gifting and stepping up the knowledge game, you can keep more of what you earn—rather than letting the taxman eat it whole.
Changes to Inheritance tax announced at the Autumn Budget included:
Tax Rules Get a Reset: What It Means for Your Inheritance
Good news to keep a close eye on: the government is extending its ice‑cold grip on the Inheritance Tax (IHT) thresholds for another two years. That means you’ll need to plan ahead because the freeze stays in force until 2030.
New Reliefs for Farms & Businesses
The rules for Agricultural Relief and Business Property Relief have been tweaked. Starting April 2026, the first £1 million of qualifying combined assets will be free of IHT – no tax handcuffs at all. Anything over that threshold? A 50 % relief kicks in, which translates to a 20 % effective tax rate. If you’ve got a farm or a small business on the books, that could be a real game‑changer.
What Oks is Going on with AIM Shares?
Those bright‑bright AIM (Alternative Investment Market) shares are getting a little less rain‑check on them. From 2026, if you hold them for at least two years, they’ll face a 20 % IHT rate – no longer the full exemption they used to enjoy. So, if you’re betting on the next big tech stumble, remember the tax might line up with your profit.
Inherited Pensions: A Two‑Fold Tax Magnet
- Starting 6 April 2027, inherited pensions can attract both inheritance tax and income tax.
- This means the total effective tax rate could reach a staggering 67 %.
- However, this is still under consultation, so keep an eye out for final wording.
Bottom Line: If you’re a taxpayer with the upcoming tax‑free £1 m threshold or holding the sort of shares that will now pay tax, pack a quick sanity check. And if you’re worried about inherited pensions, prepare for possibly double taxation – that’s the gist of it. Good luck navigating this icy terrain!
What can investors do to mitigate their inheritance tax bill?
Plan Your Legacy: Smart Moves to Lower Inheritance Tax
Think of it as a financial makeover for your estate. Even with the newest tax reforms, there are still few clever tactics to trim the inheritance tax bill and keep more of your wealth where it belongs: with the folks you care about.
1. Gift It Early – a “Fast‑Track” to Tax‑Free Gifts
- Give away money now. Gifts that don’t dent your lifestyle are instant taxes‑free on day one – and small gifts are a no‑risk, no‑cost win.
- The clock starts ticking. To become fully exempt, it usually takes seven years. If you suddenly find yourself needing that cash later, you’re out of luck – once it’s gone, the wave is broken.
- Think ahead. Use a proper gifting strategy to balance giving away wealth and staying flexible.
2. Leap Into Unlisted Businesses – Get Business Property Relief
- Turn your investments into tax shields. Buying shares in certain unquoted companies can slot you into Business Property Relief after two years, making them inheritance‑tax‑free.
- Staying in control. Unlike gifts, you keep the power to direct business decisions.
- Be ready for 2026. A new £1 million Business Relief Allowance kicks in, with anything beyond taxed at 20%.
3. The AIM ISA – A Risk‑Ready Tax Trick
- Somewhere between angels and sharks. Most ISAs aren’t tax‑free after death – your loved ones might lose up to 40%.
- Enter the AIM arena. AIM ISAs can become IHT‑free after two years of holding.
- 2026 twist. The tax treatment drops to 20% – a lighter bite.
Each method has its own sweet spot: Gifts keep it simple but lock you out. Business investments keep you in the driver’s seat but risk the market. AIM ISAs sit somewhere in the middle – they’re wild but can pay off.
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