Latest data about UK inheritance tax and capital gains taxes highlights the impact of "fiscal drag" – and the role advisors must play in seeking workable solutions, where possible.

The task confronting wealth advisors in helping clients mitigate the effect of UK inheritance tax (IHT) continues to be highlighted by official data showing that the revenue haul from the tax is rising. Other taxes, such as capital gains tax (CGT), also highlight the squeeze that taxpayers face.

Official figures last week showed that IHT receipts in February totalled £614 million ($816 million), rising slightly on a year earlier. The figures mean that for the first 11 months of the 2025-26 financial year, total IHT revenues were £7.7 billion, rising £100 million from the same period a year earlier.

The data suggests that IHT will surpass the previous financial year’s haul of £8.2 billion, the fifth annual record.

With IHT’s nil rate band threshold of £325,000 (for an individual) being held unchanged until 2031, the “fiscal drag” effect of rising house prices (albeit not rising fast at the moment) will draw more people into the tax net. Once a concern mostly for affluent and high net worth individuals, IHT has become a broader political flashpoint. However, the current Labour government, having met resistance from its own parliamentary members over spending cuts, will be reluctant to give up opportunities for IHT revenue. 

CGT receipts in February 2026 totalled £2.7 billion, up by £1.3 billion compared to the £1.4 billion recorded in February 2025. In total, that takes CGT receipts for the first 11 months of the 2025-26 tax year to £21.5 billion, up by £8.2 billion compared with the £13.3 billion through the comparative period in 2024-25.

Here are reactions to the latest figures from several wealth advisors.
 

Simon Martin, head of UK technical services at Utmost

“More families continue to be drawn into the inheritance tax net due to the decision at the Autumn Budget 2025 to maintain the freeze on thresholds, with the nil rate band remaining at £325,000 since 2009, and rising property values and asset growth pushing ever more estates above the tax-free limit.

“While this may be good news for the Treasury, this record tax burden is not good for the UK’s competitiveness and increasingly, we are seeing behavioural changes as people look at ways to defer, mitigate or avoid a larger than previously expected tax hit. Our recent analysis of Trust Registration Service (TRS)1 data showed that trust use continued to rise, with 121,000 new trusts registered in 2024-25, taking the total number to 835,000, as people use them as a core planning tool to organise succession and manage long-term family wealth. Families are also increasingly turning to ‘gifting with control’ strategies to reduce the taxable value of their estate.”
 

Ian Dyall, head of estate planning at wealth management firm Evelyn Partners

‘The expansion of IHT is not a result of sudden shifts in wealth, but rather years of fiscal drag. Nil rate bands have been frozen for many years while asset values, particularly property, have continued to inflate. Rising asset prices benefit the holders of investments and properties but the danger is that these households are sitting on an unexpectedly large, and rising, tax bill for their beneficiaries at death.

‘From a planning perspective, more estates that would once have been considered comfortably below the IHT threshold are now creeping into taxable territory. Families often discover this only when dealing with bereavement and the administration of wills, by which point opportunities for mitigation have significantly narrowed. As the UK approaches key legislative changes – notably the inclusion of unspent pension funds within IHT from 2027 – many more families risk being drawn into the IHT net, placing additional pressure on beneficiaries who may not consider themselves affluent.

‘The growth of IHT revenues serves as a reminder that, as reflected in many of our clients, IHT is no longer a marginal concern affecting only the very wealthiest, as it used to be. Families with modest and commonplace levels of wealth can now benefit from some careful estate planning and IHT-mitigation strategies."

Shaun Moore, tax and financial planning expert at Quilter

“HMRC’s February figures show again how frozen thresholds are driving the tax take. What was once labelled a stealth tax has been deployed for so long, and so consistently, that it is no longer remotely subtle. Total receipts for the year to date now stand at £860.7 billion compared with £72.6 billion last year. Importantly, these figures still pre-date any fallout from the Iran conflict. The impact of higher borrowing costs and renewed volatility in energy markets will appear in future releases, not today’s data.

“PAYE income tax and NIC receipts between April and February rose to £428.8 billion, up from £43.9 billion last year. With income tax thresholds frozen until 2031, more income is being captured by the system and earners are being lifted into higher bands earlier in their careers. Fiscal drag is steadily raising the effective tax burden while households contend with higher mortgage costs and persistent inflation, which is likely to rise again due to the conflict in the Middle East.

“The surge [in IHT receipts] reflects rising house prices and broader asset inflation, which are pushing more estates above the frozen £325,000 threshold. April’s reforms to agricultural and business property reliefs will also begin to shift the system. The government initially intended to cap 100 per cent relief at £1 million per individual, but after sustained pressure from farmers it lifted the threshold to £2.5 million each, or £5 million for couples, with only the excess qualifying for 50 per cent relief. Even with that concession, the direction is tightening. And from April 2027, most unused pension wealth will fall within IHT, meaning liabilities will rise sharply for many families. IHT is certainly no longer a tax aimed only at the mega wealthy.

“Very high capital gains tax receipts also reflect the much tighter regime now in force. February’s CGT receipts came in at £2.7 billion in the month compared with £1.4 billion in the same month a year earlier, which is a significant increase. While CGT commonly rises as the tax year end approaches, today’s numbers show just how much the reduced annual allowance and higher rates are drawing more everyday disposals into the tax net and pushing up government tax take.”

Anna Warren, tax director at global wealth management firm Bentley Reid

“IHT is the most hated tax by those who pay it, but it is essentially a ‘wealth tax’ and so it is seen by others as redistributing wealth. I think scrapping it altogether is unlikely to happen, but some of the suggestions would be welcome options.  The nil rate band for example has not been increased since 2009, this means that huge swathes of estates that previously wouldn’t have been in the IHT net, have found themselves so in recent years. 

“I certainly agree that a change in policy, with an increased nil rate band and lower rate, would change behaviour that should ultimately benefit the economy.”