Inheritance tax receipts hit highest ever – how to cut your IHT bill in 2025

We’re paying more inheritance tax (IHT) than ever before.

Last tax year IHT hit a record high of £7.5bn, and already in the first three quarters of this tax year the taxman has taken £6.3bn.

So far, it’s up 11% on the same period a year earlier.

Why are we paying more IHT?

Successive governments freezing the nil rate bands will be playing a significant role here, and more looming changes from the government are set to cut even deeper in the next few years.

The nil rate band has been frozen since April 2020, and the UK Autumn Budget confirmed the freeze will be in place until 2030.

It means that as the value of what we own rises, it will keep pushing more people into tax-paying territory.

House prices are hovering around record highs, and despite volatility, stock market performance will have helped boost plenty of investment portfolios too.

And all this is before some really major changes kick in.

More IHT changes coming – will we pay even more?

The government plans to make most pensions subject to IHT from April 2027.

While there’s an awful lot to be ironed out here, it’s highly likely to mean even more families are hit with a bill in future.

Then there are changes to agricultural property relief from April 2026, which will mean more farmers paying this tax.

Investors also need to be aware of the changes to business property relief, which affects family businesses, but also those who take advantage of qualifying AIM investments to reduce IHT. That’s because IHT relief will be halved – so will be payable at 20% where it’s due.

The government says this will affect around 1,000 investors a year, so it’s essential to check if you’re one of them.

This article isn’t personal advice. Tax rules can change, and any benefits depend on your circumstances. Investments will rise and fall in value, so you could get back less than you invest. If you're not sure what's right for you, ask for financial advice.

How to cut your IHT bill

If you’re worried about IHT, and you were planning to give your family gifts at some point, it’s worth considering the timing.

You can give up to £3,000 each tax year within your annual allowance and make regular gifts from surplus income. You can also gift outside of these, starting the clock ticking on a potentially exempt transfer, which falls out of your estate after seven years.

If you have children in the wider family you’d like to make gifts to, but you’re worried about handing the money over before they’re 18, one option is to pay into an HL Junior Stocks and Shares ISA.

You’ll have given it away today, but they won’t have access to it until they’re an adult, and able to make more mature choices about their nest egg.

Of course, it’s vital not to give away too much too soon, because it could leave you struggling later on. It can be a difficult balance, especially given that we have no way of knowing how long we’ll live, or whether we’ll end up needing care later in life.

It’s one reason why people will often get financial advice around this time, so they understand their options.

The IHT boom is far from over, and we can expect those figures to keep rising in the coming years. So, even if it’s not something that’s been on your radar in the past, it’s worth considering whether it could be in future, and what you can do about it.

Could our advisers help you with IHT planning?

A call with our advisory helpdesk is the first important step towards getting IHT advice. It will help you:

• Discover if advice is right for you

• Understand the benefits and cost

• Decide which of our advisory services might suit you best

You won't get personal advice on the call and there’s no pressure to take advice. Only if it’s right for you, will we book your free initial consultation with one of our financial advisers.

For complex calculations, they might suggest speaking to an accountant to complement their advice.