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The £1.1billion “death tax” is £100million more than was collected at the same period a year earlier, according to HM Revenue and Customs. The freeze on inheritance tax (IHT) thresholds until 2026, soaring inflation and decades of rising property prices are pushing more homes over the £325,000 point when the 40 percent tax becomes due.
The average IHT bill three years ago was £209,000. But it is likely to be 27 percent higher at just over £266,000 in the 2022/23 tax year.
Stephen Lowe, of retirement experts Just Group, said families are set to pay £37billion in IHT over the next five years.
He said: “The amount of IHT being paid has more than doubled in a decade, from under £3billion to more than £6billion in 2021/22.
“One reason is that the nil-rate band – the size of the estate that can be left without paying any IHT – has been frozen. If it had risen with the general rise in prices, it would be more than £100,000 higher today.
“Typically, the value of a residential property is the main reason why estates are pushed over the IHT thresholds. The recent house price boom across the UK means many people could be approaching or surpassing the threshold without realising.”
Alex Davies, chief executive of investment specialists Wealth Club, said: “No one likes to pay more tax than they need to, and inheritance tax is probably one of the most hated taxes of them all.”
IHT is levied at 40 percent on the value of an estate – including money, jewellery, savings, investments, cars and art – over the nil-rate band of £325,000. But this threshold has stayed at the same level since April 2011 and increasing numbers of people are becoming higher rate taxpayers on their death.
Married couples can also qualify for a “family home allowance” of £175,000.
This is added to the £325,000 and, combined, allows them to pass on estates worth up to £1million to their direct descendants.
This “residential nil-rate band” was introduced in 2017 and has been frozen until 2026.
Mr Lowe added: “The phased introduction of the residential nil-rate band between 2017/18 and 2020/21 has not stopped the continued rise in the amount of IHT being raised.”
The Daily Express has campaigned for a rise in both thresholds to keep up with property price inflation so that family homes are not caught in the tax trap.
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