The proportion of deaths subject to Inheritance Tax (IHT) could nearly double from 5.1% to 9.5% by the end of the decade after the Budget changes, Office of Budget Responsibility (OBR) figures appear to suggest.

From April 2027 inherited pension pots will face inheritance tax (IHT), Chancellor Rachel Reeves announced in her Budget.

Her decision will remove the protection enjoyed by unused pensions from IHT in a revenue-raising move for the Treasury

Utmost Wealth Solutions, which has assessed the figures, has forecast that the IHT change will create a “surge in demand” for financial advice from clients potentially facing an unexpected IHT charge on their estates.

Latest figures from HMRC, reported before the Budget, showed that Inheritance tax (IHT) raised £736m for the Treasury in September alone, pushing the half-year total haul for 2024/25 to £4.3bn, an increase of 10% compared to the same six-month period in the previous year. 

According to Utmost, supplementary tables from the Budget include OBR estimates that the proportion of deaths subject to inheritance tax will rise from 5.1% in 2022/23 to 9.5% by the end of the decade (2029/30). Prior to the Budget, the Office for Budget Responsibility forecast that the share of deaths resulting in the payment of inheritance tax would rise to 6.3% by 2028–29, the highest level since the 1970s.

Revenue from inheritance tax and its predecessors has increased from around £2billion in 1980/81, to £7.5billion in 2023/24, and will reach almost £9billion by 2028/29 (all amounts in 23/24 prices), according to pre-Budget forecasts.

Marc Acheson, global wealth specialist at Utmost Wealth Solutions, said: “Inheritance tax is often badged as one of the UK's most unpopular taxes but can be perceived as ‘voluntary’ in that there are steps that can be taken to reduce its impact.

“In the short-term, we expect to see a surge in demand from individuals looking to re-engage advisers and reconsider their plans. The clampdown on the number of assets exempt from IHT will see strategies shift to lifetime gifting earlier and more often to individuals or trusts as well as spending pension pots.

“The Budget is also likely to increase interest in insurance policies and death benefits that can protect individuals against IHT liabilities while unit linked life assurance could help advisers defer tax for their clients until a chargeable event occurs.”