Assessing the Implications of Inheritance Tax Reforms in the UK
Commissioned by Onward
The latest HMRC data show that Inheritance tax (IHT) liabilities stood at their highest-ever level in 2023/24, and that the proportion of estates in scope of IHT was at the highest level since the mid-2000s. Our study assesses the implications of reforms to the standard and residence nil-rate bands on IHT liabilities and the proportion of estates liable to IHT.
Inheritance tax (IHT) liabilities in the UK have risen steadily in recent years, reaching a record £7.0 billion in 2023/24, while the proportion of estates paying IHT has increased to 4.7%, its highest level since the mid-2000s. Against this backdrop, Onward commissioned Oxford Economics to model the implications of six potential reforms to the standard and residence nil-rate bands, assessing their impact on IHT liabilities and the number of estates in scope of the tax.
In the no-change baseline, IHT liabilities are estimated to reach £12.6 billion by 2029/30, with 52,100 estates expected to be liable for IHT. Increasing the standard nil-rate band to £500,000 is estimated to reduce liabilities to £9.6 billion and lower the number of liable estates by approximately 40% to 31,000. Raising the band to £1 million would reduce liabilities to £5.8 billion and the number of liable estates to around 12,000. Combining a full exemption for primary residences with a £500,000 standard nil-rate band would reduce liabilities to £6.6 billion and lower the number of liable estates by approximately 59% to 21,500 in 2029/30, relative to the no-change baseline.
The scenario analysis shows that these reforms can bring IHT closer to levels seen following past reforms. Overall, the research highlights the trade-off facing policymakers: higher thresholds would substantially reduce the number of families affected by IHT and move the tax closer to its historic scope but would come at the cost of lower revenues for the Exchequer. As IHT liabilities continue to grow under current policy settings, leaving thresholds unchanged is a policy decision of consequence in and of itself.
The experts behind the research
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Alex StewartAssociate Director
Alex Stewart joined Oxford Economics in May 2023 having spent the previous seven years at the HM Treasury. At Oxford Economics, Alex’s work has focused on assessing the economic impacts of policy reform and analysis of trends in household finances.
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Ross ThomasLead Economist, Economic Impact
Since joining Oxford Economics in 2015, Ross has worked on projects across a range of subject areas. These include labour market studies to estimate the impact of future technological change; studies on the growth of the digital economy; economic impact studies in the maritime, aviation and technology sectors; and work with cultural institutions such as Royal Botanic Gardens, Kew. Before joining, Ross worked as a Graduate Analyst, building econometric models, at Gain Theory. He holds a first-class degree in Economics from the University of Cambridge.
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Laura SpahiuSenior Economist, Economic Impact
Laura is a Senior Economist in Economic Impact Consultancy. She joined Oxford Economics in 2023, specialising in econometric analysis. Since then, Laura has gained experience in a range of projects across various industries, including tourism, tech and financial services. Her expertise includes methodologies such as index construction, gravity modelling, and survey analysis. She holds two master’s degrees: one in Economics from the University of Groningen and the other in Economic Analysis (Distinction) from the University of Chile.
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