The ‘Great Wealth Transfer’ From Baby Boomers Is A Major Contributory Factor

HMRC has today published official statistics for tax received in January 2025 and revealed inheritance tax receipts from April to January now stand at £7bn - £700m more than the same period last year.

The figures also represent a £700m increase on top of last month’s figure £6.3bn.

In the 2023/24 tax year, IHT receipts reached £7.6 billion, up from £7.1 billion in 2022/23.

The OBR expects IHT receipts to hit £8.3bn by the end of March, reflecting double digit annual growth.

Expert Opinion

“This latest increase in the amount of Inheritance Tax (IHT) collected is driven in part by the 'Great Wealth Transfer' from the baby boomer generation, estimated at £5.5 trillion.

“As baby boomers pass on their wealth, the value of estates subject to IHT has soared, fuelled by thresholds which have been frozen since 2009, and rising property values, leading to higher tax bills for many families.

"The Nil Rate Band continuing to be stuck at £325,000, together with other new rules means further increases in IHT receipts next tax year are likely. Long-Term Residents' (LTRs) will face IHT on their worldwide assets, affecting those who have been UK tax residents for at least 10 of the last 20 years. Additionally, trusts set up by non-UK domiciled individuals will see revised IHT treatment. If the settlor becomes an LTR, the trust's assets will be subject to the relevant property regime, including ten-year anniversary and exit charges." Helen Clarke, Irwin Mitchell partner specialising in advising high net worth individuals

The recent Budget announcements have extended the freeze on the IHT nil-rate band at £325,000 until April 2030. Additionally, significant reforms to Business Property Relief (BPR) and Agricultural Property Relief (APR) will take effect from April 2026, limiting the 100% relief to the first £1 million of combined agricultural and business property, with the rate dropping to 50% thereafter. The rate of BPR for shares in unlisted companies will also be reduced to 50%. Furthermore, the removal of the pension exemption from IHT will elevate the taxable value of estates, contributing to the continued increase in IHT receipts.