How Much Does the UK Government Make from Inheritance Tax?

Last reviewed: 24 May 2026 by the MP Estate Planning editorial team. Jurisdiction: England and Wales. Scotland and Northern Ireland have different probate and intestacy rules; the IHT thresholds are UK-wide.

The UK government earns a substantial amount from inheritance tax revenue, with recent figures indicating a steady increase. According to HM Revenue & Customs, in the tax year 2021-2022, IHT liabilities were £5.99 billion, a rise of £0.23 billion (4%) compared to the previous year.

As a homeowner in the UK, it’s natural to be concerned about the impact of inheritance tax on your estate. We specialise in providing guidance on how to protect your assets and minimise unnecessary tax liabilities. Our team of specialists is here to help you safeguard your legacy.

Want to protect your estate from unnecessary inheritance tax? You can fill out our contact form, call us at 0117 440 1555, or book a call with our team today.

Key Takeaways

• The UK government generates significant revenue from inheritance tax.
• IHT liabilities have seen a steady increase in recent years.
• Effective estate planning can help minimise inheritance tax liabilities.
• Our team provides expert guidance on protecting your estate.
• Simple steps can be taken to safeguard your legacy.

Overview of Inheritance Tax in the UK

The UK’s Inheritance Tax system can be complex, but it’s essential to grasp its basics. Inheritance Tax is a tax on the estate of someone who has passed away, and understanding its implications is crucial for effective estate planning.

What is Inheritance Tax?

Inheritance Tax (IHT) is a tax levied on the estate of a deceased individual. The tax is calculated based on the value of the estate, which includes properties, money, and other assets. In the tax year 2021 to 2022, 4.39% of UK deaths resulted in an IHT charge, increasing by 0.66 percentage points since the tax year 2020 to 2021. This translates to 27,800 deaths incurring an IHT liability.

The total number of UK deaths resulting in an IHT charge highlights the significance of understanding this tax. For more detailed information on how Inheritance Tax and Capital Gains Tax interact on inherited property, you can visit our page on Inheritance Tax and Capital Gains Tax on Inherited.

Who Pays Inheritance Tax?

IHT is typically paid by the executors of the deceased’s estate. These individuals are responsible for managing the estate, including valuing assets, paying off debts, and distributing the remaining assets according to the will or the laws of intestacy. The executors are also responsible for filing the IHT return and paying any tax due within the specified timeframe.

It’s worth noting that certain exemptions and reliefs can reduce the IHT liability. Understanding these can help minimize the tax burden on the estate and its beneficiaries.

How is it Calculated?

The calculation of IHT involves determining the value of the estate, which includes all assets owned by the deceased at the time of their passing. Certain deductions and exemptions can be applied, such as the nil-rate band and any applicable reliefs for business or agricultural property.

The nil-rate band is a key component in calculating IHT. For the 2021-2022 tax year, the nil-rate band was £325,000. Any value above this threshold is subject to IHT at a rate of 40%, although this can be reduced to 36% if certain conditions are met, such as charitable donations.

Understanding how IHT is calculated and the factors that influence it can help individuals plan their estates more effectively, potentially reducing the tax liability for their beneficiaries.

The Financial Impact of Inheritance Tax

Inheritance tax plays a crucial role in the UK’s fiscal landscape, generating substantial revenue. As we delve into the financial impact of inheritance tax, it becomes clear that understanding its implications is vital for both policymakers and taxpayers.

Annual Revenue Generated by Inheritance Tax

The annual revenue generated by inheritance tax has seen a significant increase over the years. In the 2024/2025 year, inheritance tax receipts recorded a record £8.2 billion. This surge is a testament to the growing importance of inheritance tax in the UK’s fiscal framework.

Notably, the monthly receipts have also shown remarkable figures, with April 2025 recording £780 million, the second-highest monthly total ever. This consistent rise underscores the need for a comprehensive understanding of inheritance tax and its implications.

Trends in Inheritance Tax Revenue

Analyzing trends in inheritance tax revenue reveals a pattern of steady growth. Several factors contribute to this trend, including changes in property values, shifts in demographic patterns, and adjustments in tax legislation.

As the UK’s population ages and property values continue to rise, the number of estates subject to inheritance tax is likely to increase. This, in turn, will impact the revenue generated from inheritance tax, making it a critical area of focus for the government.

Comparison with Other Taxes

When comparing inheritance tax to other taxes, it becomes evident that its contribution to the UK’s revenue is significant. While it may not be as substantial as income tax or VAT, inheritance tax provides a crucial source of income for the government.

In the broader context of the UK’s tax system, inheritance tax plays a vital role in funding public services and contributing to the overall fiscal health of the nation. As such, understanding its financial impact is essential for effective fiscal planning.

Factors Influencing Inheritance Tax Receipts

The UK government’s inheritance tax revenue is shaped by a multitude of factors, including economic and demographic changes. Understanding these influences is crucial for grasping the complexities of inheritance tax and its financial impact on the government.

Property Values and Market Trends

Property values play a significant role in determining inheritance tax receipts. As property prices fluctuate, so too does the value of estates subject to inheritance tax. For instance, a rise in property values can lead to increased tax liabilities, as seen in recent years where rising house prices have contributed to higher inheritance tax receipts.

Market trends, including changes in asset values such as stocks and bonds, also impact inheritance tax calculations. The impact of economic conditions on these assets can significantly affect the overall tax revenue.

Changes in Tax Legislation

Changes in tax legislation can directly influence inheritance tax receipts. Adjustments to tax thresholds, rates, and exemptions can either increase or decrease the amount of tax payable. For example, freezing tax thresholds can lead to more estates being subject to inheritance tax, thereby increasing government revenue.

Recent legislative changes have aimed to address issues such as pension freedoms and their impact on inheritance tax. Understanding these changes is vital for both individuals planning their estates and the government in assessing future tax revenues.

Demographic Shifts

Demographic shifts, including an aging population, can significantly impact inheritance tax receipts. As the population ages, more wealth is transferred between generations, potentially increasing inheritance tax liabilities. This demographic trend is expected to continue, influencing future inheritance tax revenues.

By understanding these factors, we can better appreciate the complexities surrounding inheritance tax and its contribution to government revenue.

Managing Inheritance Tax Liability

Effective management of inheritance tax liability is crucial for preserving your estate’s value. By adopting the right strategies, you can ensure that your beneficiaries receive the maximum amount possible.

Common Strategies to Reduce Tax Exposure

There are several strategies that can help mitigate inheritance tax liability. We recommend considering the following approaches:

• Gifting assets to beneficiaries during your lifetime can reduce the value of your estate.
• Investing in unlisted companies that qualify for Business Property Relief can provide significant tax benefits.
• Utilizing an AIM ISA can be an effective way to protect your investments from inheritance tax.

These strategies can be complex, and it’s essential to seek professional advice to ensure they are implemented correctly.

The Importance of Estate Planning

Estate planning is a critical component of managing inheritance tax liability. By planning ahead, you can ensure that your estate is distributed according to your wishes, while minimizing tax exposure.

A comprehensive estate plan should include:

1. A clear understanding of your assets and their value.
2. A strategy for gifting and distributing assets.
3. Consideration of trusts and other estate planning tools.

By taking a proactive approach to estate planning, you can reduce the risk of inheritance tax liability and ensure that your beneficiaries are well-protected.

Inheritance Tax Exemptions and Reliefs

Inheritance tax exemptions and reliefs offer a way to minimise the tax payable, ensuring more of your estate is passed to your loved ones. Understanding these can significantly impact the amount of inheritance tax your estate needs to pay.

Main Exemptions Available

Several exemptions are available that can reduce the inheritance tax liability. The largest exemption is for transfers between spouses and civil partners, which was valued at £15.5 billion in the 2021 to 2022 tax year. Other exemptions include gifts to charities and certain community organisations.

To illustrate the main exemptions available, consider the following:

Reliefs for Charitable Donations

Charitable donations are not only a noble act but also a beneficial strategy for reducing inheritance tax. Donations to registered charities can reduce the taxable value of your estate. For more information on how charitable donations can impact your inheritance tax, visit our guide on inheritance tax in the.

“Charitable giving can be a win-win for both the charity and your estate, reducing the inheritance tax burden while supporting a good cause.”

Agricultural and Business Property Relief

Agricultural and business property reliefs are crucial for those whose estates include farms or businesses. These reliefs can reduce the value of the taxable estate, potentially lowering the inheritance tax liability to nil if the estate qualifies for 100% relief.

For instance, agricultural property relief is available on agricultural property, such as farmland and farmhouses, under certain conditions. Similarly, business property relief applies to business assets, including shares in unlisted companies.

By understanding and utilising these exemptions and reliefs, you can significantly reduce the inheritance tax payable on your estate, ensuring that more of your wealth is passed on to your beneficiaries.

The Role of Trusts in Minimising Inheritance Tax

Estate planning experts often recommend trusts as an effective means to minimise inheritance tax. Trusts can play a crucial role in protecting assets and ensuring that your estate is distributed according to your wishes.

Types of Trusts for Estate Planning

There are several types of trusts that can be utilised for estate planning purposes. These include:

• Bare Trusts: Where the beneficiary has an absolute right to the trust assets.
• Interest in Possession Trusts: Where the beneficiary has the right to income from the trust assets.
• Discretionary Trusts: Where the trustees have the discretion to distribute trust assets among beneficiaries.

Each type of trust has its own advantages and can be tailored to meet specific estate planning needs.

How Trusts Work to Protect Assets

Trusts work by transferring assets into the trust, which are then managed by trustees for the benefit of the beneficiaries. This can help to reduce inheritance tax liability in several ways:

1. Assets placed in trust are generally not considered part of the estate for inheritance tax purposes.
2. Trusts can provide a flexible means of distributing assets to beneficiaries.
3. Trusts can help to protect assets from potential creditors.

By utilising trusts as part of a comprehensive estate planning strategy, individuals can effectively minimise their inheritance tax burden and ensure that their assets are protected for future generations.

It’s essential to consult with estate planning experts to determine the most suitable trust structure for your specific circumstances. We can help you navigate the complexities of trusts and inheritance tax, ensuring that your estate is managed in the most tax-efficient manner.

The Government’s Use of Inheritance Tax Revenue

The UK government utilizes inheritance tax receipts to fund various public services and initiatives. As we explore in this section, the allocation of these funds has significant implications for the overall fiscal health of the nation.

Funding Public Services with Tax Revenue

Inheritance tax revenue is a vital source of income for the government, contributing to the funding of essential public services. These services include the NHS, education, and infrastructure projects, which are crucial for the well-being of the population and the economy.

We believe that understanding how inheritance tax revenue is utilized can help individuals appreciate the broader impact of their tax liabilities. By supporting public services, inheritance tax plays a role in maintaining and improving the quality of life for many UK residents.

The Controversy Surrounding Inheritance Tax

Despite its contributions to public finances, inheritance tax remains a contentious issue. Critics argue that it is an unfair tax on assets that have already been subject to income tax. Others contend that it discourages savings and investment among individuals who are aware of the potential tax burden on their estates.

We recognize that there are valid concerns on both sides of the debate. On one hand, inheritance tax can be seen as a means of redistributing wealth and generating revenue for public services. On the other hand, it can be argued that it penalizes individuals for passing on their assets to their loved ones.

The controversy surrounding inheritance tax highlights the need for careful estate planning and professional advice to navigate the complexities of the tax system.

Seeking Professional Advice on Inheritance Tax

When it comes to managing inheritance tax, seeking professional advice can be the key to safeguarding your legacy. Experts in estate planning can provide you with tailored guidance to minimize your tax liability.

Benefits of Consulting with Experts

Consulting with experts in inheritance tax planning offers several benefits. They can help you navigate the complexities of the tax system, ensuring you’re taking advantage of all available exemptions and reliefs. For instance, they can advise on the use of trusts to protect your assets and reduce your tax burden. You can learn more about effective inheritance tax planning strategies by visiting our dedicated page.

• Personalized advice tailored to your specific circumstances
• Expert knowledge of current tax laws and regulations
• Strategies to minimize your inheritance tax liability

How to Choose the Right Adviser

Choosing the right adviser is crucial to ensuring you receive the best possible guidance on inheritance tax. Look for professionals with experience in estate planning and a proven track record in managing inheritance tax cases. It’s also important to find someone who communicates clearly and is responsive to your needs.

Key considerations when selecting an adviser include:

1. Experience and qualifications in estate planning
2. A clear understanding of your specific needs and goals
3. Transparent communication about their approach and fees

By seeking professional advice, you can ensure that your estate is managed in a way that minimizes inheritance tax and maximizes the legacy you leave behind. We can help you navigate the complexities of inheritance tax and create a personalized plan that suits your needs.

Next Steps: Protect Your Estate

Understanding the complexities of inheritance tax is crucial for safeguarding your estate. With the UK government generating significant revenue from inheritance tax, it’s essential to be aware of the inheritance tax statistics and how they impact your financial planning.

To minimize your inheritance tax liability, consider seeking professional guidance. Our team of experts is here to help you navigate the intricacies of government inheritance tax revenue sources and inheritance tax financial contribution, ensuring that you make informed decisions about your estate.

Take Action Today

Fill out our contact form, call us at 0117 440 1555, or book a consultation with our specialists to discuss your estate planning needs. We will provide you with personalized advice on reducing your inheritance tax exposure and protecting your legacy.

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How Does the UK’s Inheritance Tax Rate Compare Globally — and Is 40% Justified?

The UK levies inheritance tax at a headline rate of 40% on the portion of an estate exceeding the available nil-rate band. Whether that rate is considered harsh depends significantly on how you measure it — and which countries you use as a benchmark.

Is the UK’s Inheritance Tax Among the Harshest in the World?

In terms of the headline rate alone, the UK’s 40% sits broadly in the middle of the international range. Japan levies inheritance tax at up to 55%, South Korea up to 50%, and France up to 45% on transfers to non-linear heirs. By contrast, countries such as Australia, Canada, New Zealand, and Sweden have abolished inheritance tax entirely. The United States imposes federal estate tax only above approximately $13 million per individual, meaning the vast majority of American estates are outside its scope. What arguably makes the UK’s position feel more burdensome than the headline rate suggests is the combination of a nil-rate band frozen at £325,000 since 2009 — and scheduled to remain frozen until at least 2028 — and property values that have risen substantially over the same period. According to HMRC inheritance tax statistics, only around 4 to 5% of UK deaths currently result in an IHT charge, but that proportion is rising as asset values outpace frozen thresholds. The practical effect is a stealth increase in the tax take without any formal change to the rate.

How the Nil-Rate Band, Residence Nil-Rate Band, and Spousal Transfers Interact

Each individual has a standard nil-rate band of £325,000. Where a home is left to direct descendants, an additional residence nil-rate band (RNRB) of up to £175,000 per person may also apply, giving a combined potential threshold of £500,000 per individual. Crucially, assets passing between spouses or civil partners are generally outside the scope of IHT, and any unused nil-rate band — including unused RNRB — is typically transferable to the surviving spouse’s estate. This means a married couple leaving their home to children could potentially shelter up to £1,000,000 from inheritance tax. However, the RNRB tapers by £1 for every £2 by which the net estate exceeds £2,000,000, and it only applies where a qualifying residential property is included in the estate or was at some point owned by the deceased. The rules governing transferability and tapering are detailed in HMRC’s guidance on the residence nil-rate band. In our experience, this interaction is one of the most frequently misunderstood areas of estate planning, and assumptions made without professional input can lead families to significantly underestimate their liability.

What Happens When the Second Parent Dies?

When the first spouse or civil partner dies, their estate typically passes to the survivor outside the scope of IHT entirely. Both nil-rate bands — standard and residence — remain largely intact and transfer to the surviving partner’s estate. It is on the second death that IHT generally crystallises. At that point, the estate will be assessed against the combined threshold, which in the most favourable circumstances may be up to £1,000,000 as described above. Where the estate exceeds this figure — for example, a family with a home and savings totalling £1,200,000 — the taxable portion would typically be £200,000, generating an IHT bill of approximately £80,000 at the standard 40% rate. That figure represents real wealth that could otherwise pass to children or grandchildren. Addressing the structure of an estate before the second death occurs is generally where planning has the most measurable impact, and early review is typically far more effective than last-minute arrangements.

Common Questions About UK Inheritance Tax

How much money does inheritance tax raise in the UK?

Inheritance tax raised £7.1 billion in the 2022–23 tax year, according to HMRC tax receipts data. Receipts for 2023–24 continued on an upward trajectory, reflecting the combined effect of rising property values and a nil-rate band that has remained frozen at £325,000 since 2009. Because thresholds have not kept pace with asset price inflation, a greater proportion of estates are crossing the taxable threshold each year — even though the 40% rate itself has not changed.

Who pays inheritance tax on death?

Inheritance tax is not paid by the person inheriting — it is a charge on the deceased’s estate before assets are distributed. In most cases, the personal representatives (typically the executors named in the will) are responsible for calculating, reporting, and paying any IHT due to HMRC. The tax is generally payable within six months of the end of the month in which the death occurred, and interest accrues on unpaid amounts after that point. Where property forms part of the estate, there is a facility to pay IHT on certain assets in annual instalments over ten years, though interest still applies. Full details are available in HMRC’s guidance on paying inheritance tax.

How much can you inherit from your parents without paying taxes?

This depends on the size and composition of your parents’ combined estate. If both parents were married or in a civil partnership, up to £1,000,000 may potentially pass outside the scope of IHT where the estate includes a qualifying family home left to direct descendants — assuming neither nil-rate band was used on the first death. Where a home is not included, or the estate exceeds the £2,000,000 tapering threshold, the available allowances may be lower. It is also worth noting that only around 4 to 5% of UK deaths currently trigger an IHT charge, meaning the majority of beneficiaries receive their inheritance without any tax deduction. However, for estates above the relevant thresholds, the amounts involved can be substantial.

Is the UK’s inheritance tax going to change?

Policy in this area does evolve, and there have been ongoing discussions about the future of agricultural property relief, business property relief, and pension assets following announcements in the Autumn Budget 2024. The nil-rate band freeze is currently scheduled to remain in place until at least 2028, which is itself a form of incremental tightening. While our team cannot predict future legislative changes, the direction of recent policy — broader asset inclusion, extended freezes, and increased HMRC scrutiny of gifts and trusts — suggests that proactive planning remains prudent. Relying on thresholds rising to resolve an estate’s exposure is a risk that many families find, in hindsight, was not worth taking.

Is UK inheritance tax among the harshest in the world?

At 40%, the UK rate is not the highest globally — Japan, South Korea, and France all have higher top rates. However, the interaction of frozen thresholds, rising property prices, and relatively low exemption levels means the effective burden on middle-income estates with property can feel disproportionate. Many comparable economies either exempt primary residences, apply lower rates on family transfers, or have considerably higher threshold before tax applies. Whether the UK rate is justified is a matter of political and personal perspective — but understanding its practical effect on a specific estate is something our team works through with families regularly, and the numbers are often more significant than people expect.