Skip to main content

IHT stats highlight how fiscal drag continues to swell tax receipts

Date: 31 July 2025

2 minute read

31 July 2025

If you are covering HMRC’s inheritance tax liabilities statistics, please find below a comment from Shaun Moore, tax and financial planning expert at Quilter:

“Today’s inheritance tax statistics released by HMRC highlights how fiscal drag is swelling the receipts the government receives from the tax. For the 2022/23 tax year, an additional £710m in IHT liabilities were created compared to the previous tax year. Much of this is down to the government’s decision to keep IHT thresholds, including the £325,000 nil rate band and the £175,000 residence nil rate band, frozen until 2030. With several years of the freeze remaining, an increasing number of families will find themselves needing to pay often hefty tax bills.

“The important thing with this data is that due to the nature of IHT and the time you have to settle a liability, it is lagged and as such reflects what happened two or three years ago. Given how asset prices continue to rise and thresholds remain stuck in the freezer, more and more estates are getting captured by inheritance tax. While it rightly claimed that fewer than 1 in 20 estates pay a charge, the increases we are seeing are still significant and a burden is being placed on executors and family members at what is a difficult time. Indeed, there was a 13% increase in IHT paying estates in 2022/23 compared to the previous year, while just under half of all deaths require interaction with IHT to establish whether a liability is owed. 

“Furthermore, the average effective tax rate paid by estates was 13%, well below the headline 40% as exemptions and allowances were made use of. However, it is not a case of the more valuable estate the more you pay, as there is an inflection point at estates valued around £3m when the average tax rate paid begins to drop, as wealthier people make use of trusts and other financial planning tools.

“While the government is unlikely to unfreeze the IHT thresholds or make the regime more generous, it could look to simplify the tax in a way that makes it easier, fairer and more comprehensible for all. However, with pensions being brought into the IHT net and the government pressing ahead with reforms to business and agricultural property relief, the reality is that the number of people paying IHT is only going to climb. Without reform, families will continue to find themselves hit with unexpected tax bills on what they hoped to pass down.

“It is vital, therefore, that people look to speak to a financial adviser so they too can properly plan their estate, ensure that it is passed on in a tax efficient manner in line with wishes, and reduce the stress and burden on those handling your estate.”

Gregor Davidson

Senior External Communications Manager