Insights

Inheritance tax update: December 2025 and year end

Laura Hayward Article author separator

27 Jan 2026

There’s no let up in the relentless rise in inheritance tax receipts as more are dragged into the tax. Revenues are on course for another record take this tax year.

The topline

Inheritance tax (IHT) receipts for April to December 2025 were £6.6 billion, according to the latest ONS figures
Revenue was up £0.2bn (£232 million) or 3.7% on the same period in 2024.
It pushes receipts for the calendar year 2025 to £8.5bn from £8.1bn in 2024, up 4.4%
IHT receipts accounted for 1% of Gross HMRC Tax & NICs receipts for April 2025 to December 2025 and 0.9% of £909.5bn raised in the calendar year

The IHT overview

IHT revenue continued to climb from April 2025 to the end of the year, with a high of £844 million in July and a low of £588m in November.

These months were also the highs and lows for the calendar year, during which the total IHT receipts were £8,482 million, up from £8,124m in 2024.

With slow growth in the wider economy, IHT receipts for the tax year 2025/26 are on track to set yet another new record, both in nominal terms and as a proportion of GDP. This would continue the trend since the start of this decade.

S&W’s expert view

Despite the government finally hearing the complaints about changes to agricultural property relief and business property relief, IHT will continue to bite.

A U-turn by the Chancellor just before Christmas brought some relief for business owners and farmers. More of them will now be able to pass their companies or farms on without paying IHT, as they have in the past. For many others, though, there’s no let up. Increasing property and asset prices, combined with the freezing of the nil rate band, continue to push more estates into IHT and increase the tax they have to pay.

If the threshold at which estates start paying IHT had risen in line with inflation since 2009, it would now be worth over £525,000 instead of £325,000. If the £175,000 main residence nil rate band had not been frozen since 2020 and had grown in line with the UK House Price Index instead, it would be worth over £200,000, and almost £405,000 for a couple. That would have kept many more family homes outside IHT.

It’s not going to get any better in the foreseeable future. The IHT bands were frozen for an extra year (until 2031) in the Autumn Budget 2025, and from this April, thanks to the previous Budget, pension funds will be included in the estate. And even after the U-turn, businesses and farms with assets and property worth more than £5m still face an IHT bill.

Those affected by the changes to business property and agricultural property reliefs have some quick thinking to do: They have until April to use trusts to get the full reliefs. For many others, though, there’s still a pressing need to review their estate planning and consider the steps they can take to reduce any future IHT bill.