Inheritance tax (IHT) receipts are expected to rise substantially, with the Office for Budget Responsibility (OBR) projecting an increase to almost £15 billion by 2030/31. This follows £8.5 billion collected in the 2025/26 tax year.
The OBR attributes this anticipated rise partly to increasing equity and house prices, frozen tax thresholds, and policies from the 2024 Autumn Budget. Notably, unused pensions will become subject to IHT from April 2027.
Clare Moffat, a pensions and tax expert at Royal London, highlighted six common and costly mistakes families make regarding IHT. These include not understanding the implications of cohabiting versus marrying, which can result in unmarried couples potentially missing out on up to £1 million in IHT exemption.
Other errors include not fully utilising lifetime gifting exemptions, failing to keep detailed records of gifts, and neglecting important conversations with family about estate plans. The residence nil-rate band taper, which reduces the allowance for estates worth over £2 million, is also often overlooked. Finally, not considering how IHT on larger gifts will be paid by beneficiaries is another common oversight.