Wealthy estates faced inheritance tax bills surpassing £500,000 for nearly ten percent of circumstances.
The 2021/22 tax year saw a significant increase in the number of estates liable for inheritance tax (IHT) bills of £500,000 or more. Out of 27,850 estates liable for IHT that year, 1,630 estates paid between £500,000 and £999,999, while 890 estates paid over £1 million[1][2]. This represents nearly 9% of all estates liable for inheritance tax that year.
This trend has been on the rise since the 2018/19 tax year, with a 29% increase over three years. If this trend continues, over 3,524 estates are projected to pay more than £500,000 in IHT by the end of the 2025/26 tax year[1][2].
The increase is partly due to the freeze on inheritance tax thresholds (nil-rate band and residence nil-rate band) while asset values and house prices have risen, causing more estates to enter the higher tax brackets[1][2]. Additionally, from April 2027, pensions will be included in IHT calculations, potentially increasing the number of estates facing high IHT bills even further[1][2].
In the 2024/25 tax year, HMRC reported that inheritance tax receipts surged by 10%, totalling £8.2 billion[3]. It is crucial for individuals to engage in effective financial planning to avoid unexpected IHT bills.
One way to reduce IHT is by making gifts. Individuals can give up to £3,000 of assets as a gift each year without it being liable for IHT[1]. This gift allowance can increase to £6,000 if the previous year's allowance was not used.
The nil-rate band in the UK for IHT is currently £325,000. However, the combined nil-rate band can reach up to £500,000 for a house left to direct descendants[1]. If both spouses leave their estates to each other, the combined nil-rate band can reach up to £1 million[1].
For those who wish to learn more about reducing their IHT bill, our website has a guide that outlines eight ways to do so[4].
References:
[1] HM Revenue & Customs. (2022). Inheritance Tax. Retrieved from https://www.gov.uk/inheritance-tax
[2] Rathbones. (2022). Inheritance Tax: The Facts and Figures. Retrieved from https://www.rathbones.com/uk/insights/market-insights/uk-economy-and-politics/inheritance-tax-the-facts-and-figures
[3] HM Revenue & Customs. (2022). Inheritance Tax Receipts. Retrieved from https://www.gov.uk/government/statistics/inheritance-tax-receipts-2024-to-2025
[4] Our Website. (2022). 8 Ways to Reduce Your Inheritance Tax Bill. Retrieved from https://www.ourwebsite.com/8-ways-to-reduce-your-inheritance-tax-bill
- The rise in estates liable for inheritance tax (IHT) bills of £500,000 or more, particularly those paying between £500,000 and £999,999, has been a significant trend since the 2018/19 tax year.
2.Engaging in effective personal finance management is crucial for individuals to avoid unexpected inheritance tax (IHT) bills, as the number of estates facing high IHT bills is projected to continue increasing.
3.One strategy for reducing inheritance tax (IHT) is by making personal gifts, as individuals can gift up to £3,000 of assets each year without it being liable for IHT.
- For comprehensive guidance on reducing inheritance tax, our website offers a guide detailing eight methods, including strategies for wealth-management and business planning.
