The taxman raked in a staggering £578m from Inheritance Tax in January this year, with growing numbers of people hit with a bill thanks to frozen allowances and steep house prices.


Latest data from HMRC reveals that between April 2022 and January this year, £5.9 billion of Inheritance Tax was paid, up £853m compared to the same period last year. This means that Inheritance Tax receipts are on track to exceed a record £7 billion this year.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown said: “We can no longer lay claim to Inheritance Tax being a rich person’s tax as rising property prices mean it becomes a reality for many more families. Even if we see house price falls in the coming months it is unlikely to make a dent in the huge growth seen in recent years and so many more people will continue to be caught.”

In the Autumn Statement in November it was announced that the Inheritance Tax threshold of £325,000, above which Inheritance Tax becomes payable at a rate of 40%, will be frozen until April 2028. It has already been frozen at that level since 2009.

Ways to reduce Inheritance Tax bills

Inheritance Tax is often referred to as a ‘voluntary tax’ as it’s often possible to avoid a big tax bill by making use of allowances and exemptions.

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Alex Davies, founder of Wealth Club said: “No one likes to pay more tax than they need to, but the good news is that with a little bit of planning, there are a number of perfectly legitimate ways to reduce your liability.”

For example, every year you can give away up to £3,000 free of Inheritance Tax, known as your annual exemption. If you didn’t use your annual exemption last year, you can carry it forward to this year and pass on at total of £6,000. You can also give up to £250 each year to however many people you want to (but only one gift per person each year year) or make a wedding gift of up to £5,000 to your child; up to £2,500 to your grandchild; up to £2,500 to your spouse or civil partner to be, and £1,000 to anyone else.

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If you make a gift over the value of your annual gift allowance, then as long as you live for seven years from the date you made the gift, it should be classed at a ‘Potentially Exempt Transfer’ and so won’t be liable for Inheritance Tax.

Louise Higham, financial planning director at wealth manager Evelyn Partners, said “However, gifts between spouses or civil partners are not Potentially Exempt Transfers – they are ignored for IHT purposes altogether. Also, a married couple can gift to others up to £6,000 per annum without the gifts being considered as a Potentially Exempt Transfer.”

You can also make regular gifts from your income of you want to, which are immediately IHT- free, as long as you’re able to demonstrate your standard of living is not affected.


Inheritance tax rules can be difficult to get to grips with, so it’s worth seeking professional advice if you’re not sure how best to reduce any potential liability.