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The UK government collected a record £6.7 billion in inheritance tax during 2022-23, representing a 12% increase from the previous year and highlighting a growing financial burden on families across the country. With 31,500 estates paying the levy - a 13% rise - these figures underscore the urgent need for effective estate planning strategies.
The surge in inheritance tax receipts stems from a combination of factors that have significantly expanded the tax's reach. The primary culprit is the frozen tax-free threshold, which has remained unchanged at £325,000 per person since 2009. When accounting for inflation, this allowance has effectively shrunk dramatically over the past 15 years.
Rising asset values, particularly in property and equity markets, have pushed more estates above these static thresholds. Meanwhile, an additional £175,000 allowance for passing the main residence to direct descendants, introduced in 2017, has been frozen since 2020-21, providing diminishing protection against inflation.
The situation is set to worsen considerably. Chancellor Rachel Reeves announced significant changes in October 2024 that will further restrict inheritance tax reliefs on business assets, farms, unspent pension pots, and AIM shares from 2026. The Office for Budget Responsibility forecasts that 9.5% of UK deaths will be subject to inheritance tax by 2029-30, potentially raising over £14 billion annually.
Currently, 4.62% of UK deaths result in an inheritance tax charge, up from 4.39% the previous year. Despite the headline 40% rate, the average effective tax rate paid by affected estates in 2022-23 was 13%, thanks to various reliefs and exemptions - many of which are now under threat.
Given this escalating burden, families must act decisively to protect their wealth for future generations. Several strategies can help reduce inheritance tax liability, with investments in qualifying schemes offering particularly attractive benefits.
Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) present compelling opportunities for inheritance tax planning whilst supporting innovative British businesses. These government-backed schemes offer substantial tax advantages that extend well beyond their initial income tax benefits.
Enterprise Investment Scheme relief: EIS investments qualify for Business Relief, meaning shares held for at least two years, provided conditions are met, are entirely exempt from inheritance tax, provided they do not exceed a £1m allowance (from April 2026). For assets that exceed this allowance and other existing allowances, the IHT relief available through business relief falls to 50%. Still, this represents a significant advantage over many other asset classes that face the full 40% charge. Tax reliefs are subject to status and change.
The mechanics are straightforward: when you invest in qualifying EIS companies through platforms, provided the shares are held for the minimum two-year period, they pass to beneficiaries free of inheritance tax. This relief applies regardless of the investment's value or performance, making it particularly attractive for larger estates.
Seed Enterprise Investment Scheme benefits: SEIS investments offer similar inheritance tax advantages to EIS, with the added benefit of supporting very early-stage companies. The same two-year holding requirement applies, after which the investments become exempt from inheritance tax.
Both schemes also provide immediate income tax relief - up to 30% for EIS and 50% for SEIS - alongside capital gains tax exemptions on successful exits, creating a triple layer of tax advantages. Tax reliefs are subject to status and change.
You can find out more about strategies for managing IHT with EIS and SEIS in our dedicated inheritance tax guide:
Annual gifting: Utilise the £3,000 annual exemption, plus additional allowances for wedding gifts and regular payments from income that don't affect your standard of living.
Potentially exempt transfers: Larger gifts become exempt from inheritance tax if you survive seven years after making them, with taper relief reducing the tax charge if you survive between three and seven years.
Trust structures: Various trust arrangements can remove assets from your estate whilst maintaining some control over their distribution, though recent changes have made some structures less attractive.
Pension planning: Before the 2026 changes take effect, unspent pension pots remain outside inheritance tax, making pension contributions particularly tax-efficient for older investors.
The frozen thresholds and rising asset values mean inheritance tax planning has become increasingly urgent for middle-class families, not just the wealthy. The forthcoming changes from 2026 make immediate action even more critical.
EIS and SEIS investments offer a particularly attractive combination of supporting innovative businesses whilst achieving significant tax advantages. However, these investments carry risks and aren't suitable for everyone, so professional advice is essential.
As Ian Dyall from Evelyn Partners notes: "As asset prices, especially equities and property, continue to rise, the frozen nil-rate bands offer less and less protection against IHT." With inheritance tax receipts set to double by 2029-30, the time for action is now.
The record £6.7 billion collected in 2022-23 represents just the beginning of a significant expansion in inheritance tax's reach. Families who act decisively today can protect their wealth and ensure more of their hard-earned assets pass to future generations rather than to the Treasury.
EIS and SEIS investment opportunities available through SyndicateRoom
SyndicateRoom currently operates three funds, enabling investors to build portfolios of EIS and SEIS eligible companies. For EIS opportunities, take a look at:
The Access EIS Fund, which emphasises diversification, and access to high-potential UK startups through co-investment with leading angel investors.
The Angel Academe EIS Fund, the UK's first EIS fund that focuses on female-founded tech startups.
For SEIS opportunities, see the Carbon13 SEIS Fund, which invests in generation-defining climatetech innovators.
