Inheritance tax receipts soar to all-time high
Inheritance tax receipts soared to a record high over the last financial year as Labour’s targeting of property owners helped fund sweeping spending increases.
Official data on Thursday morning showed that annual inheritance tax receipts rose to £8.5bn in the year between 2025 and 2026. This compared to total receipts of £8.3bn in the previous year.
The rise in inheritance tax collection coincided with a broader rise in receipts over the year as the government’s income rose by more than nine per cent, or £87.7bn, compared to the financial year ending in 2025.
Stricter inheritance rules, which formed part of the government’s non-dom crackdown, plus the continuation of the freeze in the nil rate band of £325,000 for estates have boosted receipts, with further increases expected to come until around 2031 when thresholds are unfrozen.
The figures do not include any uplift from the government’s inheritance tax raid on family businesses and agricultural property or its decision to make pensions savings liable to the tax, which all only came into force this month.
The decision to end carve outs for those farming a family firms has sparked a wave of warnings from entrepreneurs, including James Dyson, hotelier Sir Rocco Forte and JCB heir Jo Bamford.
Susannah Streeter, chief investment strategist at Wealth Club, said more “ordinary families” would be pulled into paying inheritance tax as the freeze on valuation bands are extended, contributing to fiscal drag.
“HMRC’s tougher enforcement is adding further pressure at what is already a difficult time for bereaved families,” Streeter said.
“With the tax base widening and sharp ‘cliff edges’ in the relief system still in place, proactive planning and accurate reporting have never been more important.”
She suggested that the Labour government had made a “mess of inheritance tax reform”.
Inheritance tax boosts government coffers
The tax rises funded a jump in total public sector spending, which rose by £72bn over the year after promises to increase budgets for health, education and welfare were made.
Data on Thursday also showed that capital gains taxes for the year rose by 62 per cent after broad changes to the wealth levy announced in Rachel Reeves’ first Budget.
Wealth advisers have widely suggested that pre-Budget speculation over the ways taxes could change for property owners forced Britons to make pre-emptive decisions, yielding the Treasury extra cash.
Government receipts on capital gains could fall in the coming years as a result, according to Richard Jameson, a partner at the accountancy Saffery.
Sarah Coles, head of personal finance at AJ Bell, said: “Some will be hoarding assets until they die, so they never have to pay the tax, and some will be realising gains gradually.
“However, others have bitten the bullet and paid the tax in the past 12 months. Capital gains tax is lumpy, with a huge chunk of the gains made by a small number of very large investors. Clearly some of them have hit the wall and paid up in the past 12 months.”