Stealth inheritance tax rise sees Treasury rake in file £4.4bn as households quietly pulled into the online

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Your assist makes all of the distinction. Learn extra The federal government pulled in £4.4bn from inheritance tax (IHT) prior to now six months as extra households had been “quietly” pulled into the online, information from the Treasury exhibits.

The quantity raised between April and September this 12 months is up 2.3 per cent and is because of be a file for the federal government.

The enhance to the Treasury coffers is partly as a consequence of frozen thresholds which have remained in place for years, that means increasingly persons are being dragged into the bracket the place tax is required to be paid.

Any property – the whole asset possession of an individual who dies – price greater than £325,000 is topic to tax above that restrict. There are exemptions, reminiscent of passing a principal house to youngsters or grandchildren – known as the residence nil charge band or RNRB – which provides an additional £175,000.

However the threshold has been frozen since 2009, and – with property reminiscent of property, investments and even money all rising in worth – extra individuals who would beforehand not have amassed complete property wealth past that worth are actually doing so.

The upshot is that extra tax is due upon demise, with the usual IHT charge set at 40 per cent for values above thresholds.

The method is called fiscal drag – much like many employees being pulled into increased revenue tax brackets as wages rise, however band thresholds keep frozen.

Ian Dyall, head of property planning at wealth managers Evelyn Companions, identified it was prone to be one other record-breaking 12 months of revenue for HMRC by the use of IHT.

“The Treasury is on track for an additional record-breaking 12 months of revenues from inheritance tax (IHT). Fiscal drag is quietly pulling 1000's extra households into the IHT web as asset values improve year-by-year,” he mentioned.

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Mr Dyall added that the upcoming Price range would possibly see Rachel Reeves make additional modifications which have an effect on IHT, reminiscent of lowering individuals’s skill to present money previous to demise with out as a lot tax being payable.

<img src="https://static.independent.co.uk/2025/10/08/00/e6fc7818a373b73c0ae36d76d50963b7Y29udGVudHNlYXJjaGFwaSwxNzU5OTQzNTYx-2.81803544.jpg" srcset="https://static.independent.co.uk/2025/10/08/00/e6fc7818a373b73c0ae36d76d50963b7Y29udGVudHNlYXJjaGFwaSwxNzU5OTQzNTYx-2.81803544.jpg?quality=75&width=320&auto=webp 320w, https://static.independent.co.uk/2025/10/08/00/e6fc7818a373b73c0ae36d76d50963b7Y29udGVudHNlYXJjaGFwaSwxNzU5OTQzNTYx-2.81803544.jpg?quality=75&width=640&auto=webp 640w" loading="lazy" alt="Rachel Reeves is under pressure to fix the UK’s ailing economy" class="sc-1mc30lb-0 ggpMaE"/> Rachel Reeves is below stress to repair the UK’s ailing financial system (PA Wire) “Potentialities embody a crackdown on gifting, which might take the type of a lifetime gifting cap changing the present limitless gifting rule below the seven-year exemption, or extending the seven-year rule out to 10 or extra years.

“The mixture of unspent pension property changing into topic to IHT, fears over potential restrictions to pension tax-free money, and hypothesis that gifting guidelines could possibly be tightened up, has brought on some households to unexpectedly withdraw pension money and begin giving it away.”

Most consultants advocate not withdrawing pension lump sums in a rush forward of the Price range till monetary recommendation has been sought and you might be sure of your possible wants for retirement.

Rachael Griffin, tax and monetary planning skilled at Quilter, mentioned the general figures from authorities borrowing confirmed the Treasury stays reliant on taxing the identical individuals much more.

“At the moment’s HMRC information affords a revealing snapshot of the general public funds and the way closely the federal government continues to lean on fiscal drag to prop up revenues,” Ms Griffin mentioned.

“The course of journey suggests this burden might develop additional. There's hypothesis that the federal government is contemplating modifications to the gifting guidelines. Mixed with the deliberate inclusion of pensions inside IHT from 2027, these measures danger reworking what was as soon as a distinct segment tax affecting a small minority into one which captures an more and more massive share of the inhabitants.”

It's estimated that greater than £3 trillion of property is owned or held by these aged 55 and over within the UK.

Uncertainty over what precisely shall be introduced within the Price range has created a rush of inquiries to monetary planners, over pensions but additionally companies, home-buying and extra potential long-term wealth switch points.

The housing market has not skilled its regular autumn surge this 12 months, with some consultants suggesting that it's also as a consequence of Price range uncertainty, leaving consumers in wait-and-see mode earlier than spending.

Stephen Lowe, director at retirement specialists Simply Group, added: “The Treasury now seems set to gather a fifth consecutive file annual haul. With additional reforms that had been introduced eventually autumn’s Price range but to be applied, we will anticipate this development to proceed and develop.

“Anybody who's unsure or involved that their property could also be topic to inheritance tax ought to get an up-to-date valuation of their property, together with a latest evaluation of their property wealth. Property planning is complicated and tough – particularly with tinkering to the foundations – and plenty of households who want to handle their property effectively will profit from skilled monetary recommendation.”