Inheritance tax receipts for the 2025/26 financial year reached £8.5 billion, a £200 million increase from the previous year. This marks a fifth consecutive annual high for IHT receipts.

The main nil-rate band for inheritance tax has been fixed at £325,000 since 2009 and will remain frozen until at least April 2031. The 40% IHT rate applies once estates exceed this threshold.

HMRC is employing artificial intelligence and data matching technology to identify discrepancies in property valuations. This change reflects a shift towards questioning figures submitted in IHT returns rather than accepting them at face value.

Executors who fail to report property values accurately could face financial consequences, including additional tax and interest payments. Laura Walkley noted that HMRC is focusing on property valuations as a significant potential source of revenue.

In March alone, inheritance tax receipts generated £755 million, underscoring the growing importance of accurate estate planning. Yet, HMRC maintains that most individuals pay the correct amount of inheritance tax.

The increased scrutiny comes as market uncertainty affects property transactions, making accurate valuations more challenging. Officials have not confirmed how many investigations are currently underway.

This trend may lead to more rigorous audits and assessments in the future as HMRC continues to enhance its capabilities in detecting valuation discrepancies.

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According to a survey by Scottish Widows, 57% of financial advisers report that their clients are uncertain about the implications of these changes. In response, 55% of advisers are recommending lifetime gifting strategies, while 49% are suggesting earlier drawdown of pension assets to mitigate potential tax liabilities.

Additionally, 32% of advisers are advocating for the use of Individual Savings Accounts (ISAs) as alternative tax-efficient wrappers. Trusts or onshore bonds are being advised by 37% of advisers, and 18% are suggesting family investment companies as part of their clients’ financial strategies.

The Treasury has accepted some recommendations from the House of Lords regarding the treatment of unused pensions in inheritance tax calculations. However, under the new rules, only the first £2.5 million of business assets will qualify for full relief, with any value above this threshold subject to a 20% tax charge.

Jo Bamford, a notable figure in the industry, has expressed concern over the implications of these changes, stating, “The family tax is a real problem.” He emphasized the need for families to consider their investments in Britain amidst these tax reforms.

Jenny Davidson from Scottish Widows highlighted the significance of these changes, noting, “Pensions have long been a cornerstone of estate planning, offering a highly tax-efficient way to accumulate and pass on wealth.” She added that the upcoming reforms represent perhaps the most substantial change to pensions since the introduction of pension freedoms.

As the April 2027 deadline approaches, advisers are proactively preparing their clients for these changes, ensuring they are informed and ready to adjust their financial plans accordingly.

Details remain unconfirmed regarding how these changes will be fully implemented and the potential long-term effects on inheritance tax policy in the UK.

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