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The number of estates liable to pay inheritance tax rose by 13% in 2022–23 compared with the previous year, according to new figures from HM Revenue and Customs (HMRC).
A total of 31,500 estates paid the levy, representing 4.62% of UK deaths during the year – up 0.23% on 2021–22. Liabilities reached £6.7bn, spelling a 12% increase year-on-year.
The rise comes ahead of major changes to the inheritance tax regime due from April 2026, which are expected to bring more estates into scope. From that date, relief for business and agricultural assets will be capped at £1m, with any excess subject to 50% relief. Listed shares treated as unquoted shares, including AIM shares, will also qualify for only 50% rather than full relief.
Further reforms planned for April 2027 will extend inheritance tax to unspent pensions pots, which HMRC estimates will affect about 8% of estates.
The Office for Budget Responsibility (OBR) has forecast that inheritance tax receipts will reach £8.4bn in 2024–25, up 11.6% on the previous year, largely due to higher asset prices and frozen thresholds. Receipts are projected to climb to £14.3bn by 2029–30, with £2.5bn of that increase attributed to the reforms announced in the October 2024 Budget.
Ben Handley, tax partner at BDO, said: “While these latest figures show a fairly modest rise in the number of estates subject to inheritance tax in 2022–23, we’re likely to see many more people dragged into the IHT net when seismic changes to the regime come into force from 2026.
“From next April, the capping of business and agricultural relief to £1m of qualifying assets will bring many business and farm owners into scope for IHT for the first time. These latest figures for 2022–23 show that families of business and agricultural owners benefitted from £5.8bn of inheritance tax relief but this will reduce significantly from April 2026 onwards.”
He added: “Further changes due in April 2027 will apply inheritance tax to unspent pensions pots. These changes will impact around 8% of estates – and add significant administrative burdens to families at a difficult time.”
According to BDO, the publication of draft legislation last week confirmed the government’s intention to proceed with the reforms despite industry concerns, and dashed hopes that the £1m allowance for agricultural and business relief would be made transferable.
