Inheritance Tax Revenue Hits £7.5 Billion: HMRC Figures Show Record Collections

Published: 22 February 2026

The Event

HMRC released inheritance tax statistics today showing that the government collected seven point five billion pounds in inheritance tax in the 2024-25 tax year, up from seven point one billion in 2023-24. This is the highest inheritance tax revenue ever recorded, and it represents a twenty-three percent increase from five years ago.

The number of estates paying inheritance tax also reached a new high. Fifty-two thousand estates paid inheritance tax in 2024-25, up from fifty thousand in 2023-24 and from just twenty-five thousand in 2009-10. The number of estates caught has more than doubled in fifteen years.

And the average inheritance tax bill per estate is rising. Estates paying tax in 2024-25 paid an average of one hundred and forty-four thousand pounds, up from one hundred and thirty-eight thousand in 2023-24.

Why It Matters

Seven point five billion pounds is enormous revenue from a tax that affects a relatively small number of estates. Fifty-two thousand estates paid inheritance tax out of around six hundred thousand total deaths in 2024-25. That is under nine percent of estates. But that nine percent paid an average of one hundred and forty-four thousand pounds each.

And the increase is driven entirely by fiscal drag. The nil-rate band, the amount you can pass on tax-free, has been frozen at three hundred and twenty-five thousand pounds since April 2009. Seventeen years without an increase. Not indexed to inflation. Not adjusted for house price growth. Frozen.

In 2009, three hundred and twenty-five thousand pounds was a substantial sum. The average UK house was worth one hundred and fifty thousand pounds. Most estates were comfortably below the threshold. But by 2025, the average UK house is worth two hundred and ninety-five thousand pounds. And in London and the South East, average houses are worth four hundred thousand, five hundred thousand, six hundred thousand pounds or more.

So estates that would have escaped inheritance tax entirely in 2009 are now caught. A couple who bought a house in London in the 1980s for eighty thousand pounds now own a property worth six hundred thousand pounds. When they die and the property passes to their children, the estate exceeds the nil-rate band even with the residence nil-rate band, and inheritance tax is owed.

This is not because people are dying wealthier. This is because the threshold has not moved while property values have, and fiscal drag has pulled more estates into the net every year.

Who Is Paying

The estates paying inheritance tax are not super-wealthy. They are middle-class families who own property. The median estate paying inheritance tax in 2024-25 is worth around seven hundred and twenty thousand pounds. Not millions. Seven hundred and twenty thousand.

And the composition of these estates is revealing. Around eighty percent of the value is property. The family home. Not investment portfolios, not business assets, not luxury goods. Just a house, bought decades ago for a modest price, now worth enough to trigger inheritance tax.

A family in outer London, a couple who bought a three-bedroom house in the 1980s for ninety thousand pounds, now own a property worth six hundred and fifty thousand pounds. When both parents die, the property passes to their children. With the residence nil-rate band for a couple, the threshold is one million pounds (three hundred and twenty-five thousand nil-rate band each, plus one hundred and seventy-five thousand residence nil-rate band each). No tax owed if properly structured.

But if one parent died before the transferable nil-rate band was introduced, or if the residence nil-rate band conditions are not met, the threshold could be just five hundred thousand pounds (the basic nil-rate band for one person plus the residence allowance). Tax on one hundred and fifty thousand pounds at forty percent is sixty thousand pounds owed.

The children, inheriting a house, must find sixty thousand pounds in cash within six months to pay HMRC. And if they cannot, they must sell the house. Often quickly, often below market value, to raise the cash. And the house, the family home, is gone.

This is who pays inheritance tax. Not billionaires. Middle-class families with one property in a region where house prices have risen.

Geographic Concentration

Inheritance tax is geographically concentrated. Over sixty-three percent of estates paying inheritance tax are in London and the South East. Not because people in those regions are wealthier, but because house prices are higher.

In the North East, the average house is worth one hundred and seventy thousand pounds. In London, it is five hundred and forty thousand pounds. A couple in the North East, owning an average house, are comfortably below the inheritance tax threshold. A couple in London, owning an average house, are not.

And this geographic concentration is intensifying. Between 2020 and 2025, the proportion of estates in London and the South East paying inheritance tax has risen from fifty-eight percent to sixty-three percent. House prices in those regions are rising faster than elsewhere, pulling more estates into the tax net.

Reliefs: The Very Wealthy Escape

While middle-class families with property pay inheritance tax, the very wealthy often do not. Business relief and agricultural relief allow business assets and farmland to be passed on entirely tax-free, with no upper limit.

In 2024-25, business relief exempted two point three billion pounds of estate value from inheritance tax. Agricultural relief exempted one point one billion pounds. Three point four billion pounds of wealth passed tax-free, much of it to very wealthy families with multi-million-pound estates.

A family with a ten-million-pound farm pays zero inheritance tax. A family with a seven-hundred-thousand-pound house pays forty percent on the excess over the threshold. The system is inverted. The wealthier the estate, the more likely it is to escape tax through reliefs.

And the use of these reliefs is growing. Between 2020 and 2025, the value of business relief claimed has increased by thirty-two percent. Wealthy families, advised by tax planners, structure their estates to maximize reliefs, and billions pass tax-free every year.

Forced Sales

When families cannot afford to pay the inheritance tax bill in cash, they must sell assets, usually the family home. HMRC does not publish data on forced sales specifically, but estate agent surveys and probate data suggest forced sales driven by inheritance tax have increased significantly.

In 2025, estate agents report that around eighteen percent of probate property sales, properties sold after someone dies, are forced sales driven by the need to pay inheritance tax quickly. That is around nine thousand properties sold under pressure, often at below market value, to raise cash for HMRC.

And these forced sales benefit buyers, particularly investors, who can pay cash quickly and acquire properties at discounts. The family loses the home and receives less than market value. The investor profits. And HMRC collects its tax.

Public Opinion vs Political Reality

Inheritance tax is one of the most unpopular taxes in the UK. Polling consistently shows that around sixty-five to seventy percent of people oppose it, across all political affiliations, across all income groups.

People see inheritance tax as unfair, as taxing wealth that has already been taxed, as punishing those who saved and worked to buy a home. And the fact that it falls heavily on middle-class families with property while the very wealthy avoid it through reliefs intensifies the anger.

But despite this unpopularity, inheritance tax persists. Both Labour and Conservative governments have kept it, have frozen the nil-rate band, have benefited from fiscal drag. Because the Treasury needs the revenue, seven point five billion pounds per year, and because those affected, while numerous, are not organized, do not lobby effectively, and do not have the political power to force change.

And raising the nil-rate band is expensive. Increasing it from three hundred and twenty-five thousand to five hundred thousand pounds, just to restore it to its 2009 real-terms value adjusted for house price growth, would cost the Treasury around two billion pounds per year in lost revenue. No government wants to find that money.

What the Revenue Is Funding

Seven point five billion pounds in inheritance tax revenue is a significant contribution to public finances, but it is a small fraction of total government spending. The UK government spends around one trillion pounds per year. Inheritance tax is zero point seven five percent of that.

For comparison, the NHS costs around one hundred and sixty-five billion pounds per year. Education costs around one hundred billion pounds. Defense costs around sixty billion pounds. Inheritance tax revenue could fund the NHS for around seventeen days.

So inheritance tax is not a major revenue source. It is politically symbolic. It is unpopular, it affects a vocal minority, and it generates headlines. But fiscally, it is relatively minor.

What to Watch Next

The Spring Budget on 12th March 2026 could include changes to inheritance tax. If the Chancellor announces an increase in the nil-rate band, or indexation to inflation, or reforms to business and agricultural reliefs, it would be significant. But given the fiscal pressures and competing demands for spending, inheritance tax reform is unlikely.

Also watch for HMRC's 2025-26 revenue forecast, due in spring. If HMRC projects inheritance tax revenue to exceed eight billion pounds by 2027-28, expect political debate to intensify. Eight billion is a psychological threshold, and crossing it could force action.

And watch for court cases challenging inheritance tax assessments, particularly around residence nil-rate band eligibility and relief claims. High-profile cases can shape how the tax is applied and can create pressure for legislative clarification.

What You Can Do

If you expect your estate to exceed the inheritance tax threshold, plan ahead. The nil-rate band for individuals is three hundred and twenty-five thousand pounds. Add the residence nil-rate band of one hundred and seventy-five thousand if leaving your home to direct descendants, and you have five hundred thousand pounds. For couples, this doubles to one million pounds if you structure it correctly with transferable allowances.

If your estate exceeds these thresholds, consider lifetime gifts. Assets given away more than seven years before death are exempt from inheritance tax. But you must survive seven years, and you must genuinely give up control of the assets. Gifts with reservation, where you give away your house but continue living in it rent-free, do not qualify.

If you own a business or farmland, ensure you structure ownership to qualify for business relief or agricultural relief. These reliefs are generous, potentially exempting your entire estate, but they have strict conditions. Professional advice from a tax specialist is essential.

If you are inheriting and facing an inheritance tax bill, apply for a payment plan. HMRC allows inheritance tax to be paid in installments over ten years if the estate includes property or business assets. Interest accrues, but it can ease the immediate cash flow pressure and avoid forced sales.

And if you want to understand why inheritance tax is structured this way, why the nil-rate band has been frozen for seventeen years, and who benefits from the current system, read the full deep dive on the UK Inheritance Tax System.

Links:
[Read: The UK Inheritance Tax System Deep Dive - How This System Really Works]
[Read: Where Is the UK Inheritance Tax System Heading? Data Snapshot (2026)]