IHT changes are targeting the wrong people entirely

As more people are entering the Inheritance Tax bracket it’s ordinary people who will suffer, writes David J Alexander​.

The latest statistics on Inheritance Tax (IHT) collected make for grim reading for homeowners and those with assets. They show that £7.13 billion was collected between April 2025 and January 2026, with £9.1bn forecast for the full financial year – £1.3bn higher than the same period the previous year.

There were 31,500 estates affected, which is 4.62 per cent of all estates, but this represented an increase of 13 per cent on the previous year. The total number of estates impacted by IHT is expected to rise to 10 per cent by the end of the decade, with frozen thresholds bringing more estates into taxation. The current IHT £325,000 nil-rate band has been frozen since 2009 but, if it had risen with inflation it would now stand at £523,419.

With pensions being included in assessments from April 2027 – which in itself is expected to bring 50,000 estates into the tax – and the IHT caps for agricultural and business property reliefs coming in this April, the opportunities for the government to collect more tax from estates has grown considerably. The Office for Budget Responsibility (OBR) believes that by 2030/31 the amount collected will reach £14.5bn.

Recent surveys have found that 54 per cent of people would like the abolition of IHT altogether, while 67 per cent would like the thresholds increased to reduce the number of estates being hit.

Alongside the increasing number of estates affected the number of investigations is soaring. In the first nine months of the current tax year, HMRC launched 3,636 investigations – nearly 1,000 more than the same time last year. At a time when people are grieving, they are facing lengthy investigations into their loved ones’ estate.

In the next few years, IHT will be transformed into a tax that targets people from all walks of life. It increasingly impacts more and more ordinary homeowners who have simply seen the value of their property and assets increase over the last three decades. To state that someone who has paid a mortgage and saved all their life and accumulated assets worth over £325,000 is now rich is clearly not a realistic definition of wealthy.

But the greater tax take from IHT won’t hit the very wealthy, who have advisers and accountants to ensure their liability is reduced. It will be those in the middle who cannot afford such advice and are hit with an increasingly punitive targeting of their homes, pensions, savings and assets.

With the Chancellor’s spring statement due on 3 March an opportunity has arisen to soften the impact of these changes to inheritance. The Chancellor has an unexpected £30.4bn budget surplus and, if she wishes to encourage enterprise, saving, thrift and investment, then she could do worse than use some of her recent tax windfall to reduce the burden of taxation on those who have accumulated money throughout their lifetime.

It can’t be right that this specific group – who have saved, bought a home and paid into a pension – should be seen as an easy target for increased taxation. This is counterintuitive in any society where the encouragement of thrift, effort, saving and work is being punished rather than rewarded and these individuals were simply hoping their lifelong efforts would result in them being able to provide a nest egg for their families.