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Rachel Reeves has overseen inheritance tax (IHT) receipts of £4.4 billion in the first six months of the 2025/26 tax year, HM Revenue and Customs (HMRC) has revealed – and experts warn this is just the start, with the Chancellor likely to go after even more. The figure marks a modest rise on the same period last year, but for many families, it is another sign that passing wealth on to the next generation is becoming increasingly costly.

Analysts describe the current IHT regime as a slow but relentless squeeze, driven by frozen thresholds and rising property values, which shows no sign of slowing. Nicholas Hyett, Investment Manager at Wealth Club, warned that the Government could target lifetime gifts and other reliefs to increase revenue further. He said: “The most likely area for change is gifting rules. Currently, gifts made more than seven years before death are fully exempt, and regular gifts made out of surplus income are immediately IHT-free. Adjusting these rules could generate a significant windfall, though it would be deeply unpopular with families trying to plan responsibly.”

One option under discussion would extend the seven-year rule to 10 years. Under such a change, gifts made up to a decade before death could be counted as part of the estate for IHT purposes, potentially hitting grandparents helping with school fees or parents aiding children with house deposits.

He said: “Changes like this would add financial strain on top of emotional strain.”

IHT relief on regular gifts from surplus income is another potential target. Currently, if a grandparent gives £20,000 a year from regular income to help pay for a child’s private education, it is completely exempt.

Restricting this relief could see these gifts fall under the seven-year rule, generating tens of thousands in extra tax for families.

While some uncertainty hangs over the autumn Budget, Ms Reeves has indicated that raising taxes on wealthier households will be part of her plan. Measures under consideration include tweaking capital gains tax exemptions and possibly introducing National Insurance on rental income.

Experts warn that without clarity, families may make rushed financial decisions that carry long-term consequences.

Despite the rising IHT tide, there are still strategies to mitigate its impact. Giving money away early, investing in unlisted companies qualifying for Business Property Relief, or using AIM shares remain options, though all carry risk.

From 2026, a £1 million Business Relief allowance will limit the benefit for larger estates, with anything above taxed at 20%.

The surge to £4.4 billion highlights the growing fiscal pressure on estates and the increasing burden on families. Experts warn that the Chancellor’s appetite for further IHT gains could make this the start of an even harsher squeeze.

He said: “The government has room to raise more, and given the way thresholds and reliefs work, the next moves could be the most painful yet for families.”

For now, the first half of 2025/26 serves as a clear signal: the IHT squeeze is in full effect, and according to analysts, Ms Reeves is unlikely to stop there.

Families planning inheritances would be wise to take action now, because the next wave of tax changes could arrive sooner than expected.

The Chancellor’s nheritance tax (IHT) policy focuses on maintaining existing thresholds while exploring ways to ensure wealthier estates contribute more to public finances.

She has frozen the IHT threshold and signalled potential tightening of reliefs on gifts and certain business or agricultural assets to increase revenue.

At the same time, she aims to avoid broad wealth taxes or measures that could undermine economic growth, balancing fiscal ambition with political and economic caution.

Ms Reeves outlined her approach in an article published in the Times at the weekend.

In it, she said: “People do need to pay their fair share of tax.

“We are looking at all options, but we are not going to introduce a wealth tax.

“The wealthy should pay a fair share, but we need to do it in a way that doesn’t harm the economy.”